February 22, 2013

Lipper Fund Flows: International, Multi-Cap and Small-Cap Funds Help Extend Investors’ Love Affair with Stocks

by Jeff Tjornehoj

Nearly two months into 2013, investors’ newfound affection for stock funds shows few signs of abating, although the most recent data from Lipper signal that they tend to favor non-U.S. funds as well as multi-cap or small-cap funds over their large-cap rivals.

Mutual fund investors are sticking to their New Year’s resolution to buy more stock funds, according to the most recent data provided late yesterday by Lipper, a division of Thomson Reuters. In the past week, ended February 20, they contributed another $2.6 billion to those accounts, continuing to favor companies that are based outside the United States. While non-domestic equity funds attracted $1.7 billion in inflows during the week, their domestic equity mutual fund counterparts pulled in only $900 million in the same period.

Within the U.S. equity funds universe, investors clearly favored multi-cap and small-cap fund strategies at the expense of the funds in Lipper’s Large-Cap Core Funds universe (which reported outflows of $255 million) and the S&P 500 Index Objective Funds (which saw net outflows of $147 million). Equity exchange-traded funds (ETFs) did see some inflows, but they were modest – only $237 million – in the just-ended five-day period. Within the ETF universe, the SPDR S&P 500 ETF (SPY) reported outflows totaling $696 million. As the price of gold fell to its lowest levels in four months, it wasn’t too surprising to see the SPDR Gold (GLD) lead the equity ETF outflows list at $1.4 billion.

Taxable bond funds netted $2.4 billion in inflows, with the corporate investment-grade group leading the way and reporting net sales of $1.6 billion. Flexible funds followed, recording inflows of just less than $1 billion. Meanwhile high yield funds reported their second week of outflows in the past three weeks, although this time the group lost only a net $70 million of assets. The Loan Participation Funds group, in contrast, remains very popular, and led the taxable funds in terms of inflows: funds in this category attracted $863 million, although that was less than the $1.2 billion recorded in the previous week. This category proved popular among ETF investors as well, with the PowerShares Senior Loan (BKLN) leading the way, reporting net sales of $133 million.

In the municipal bond arena, net inflows totaled $230 million, about half of the previous week’s levels. Overall, muni bond interest an activity was widely dispersed, with no classification witnessing net inflows or outflows of more than $60 million for the week.

As investors remain more or less content to remain focused on “risk on” investments, withdrawals from money market funds continued during the most recent weekly period. For the five days ended February 20, outflows totaled $19 billion, the highest such weekly total outflow since the last week of October 2012, when the group saw net sales of $23.5 billion.

For more information on this week’s fund flows data, please refer to Lipper’s database or this video.

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