Choppy equity markets, anxiety about Fed moves and mute economic news kept investors on edge. As a result, U.S. mutual funds and exchange-traded funds (ETFs) (excluding money market funds) reported net outflows of $7.7 billion for the week ended June 12 — on top of $8.9 billion in outflows in the previous week.
Stock prices see-sawed during the week, reacting to continued worry that the Federal Reserve might taper its current quantitative-easing efforts. Despite an on-target unemployment report for May, a sudden shift in global yields and volatility in Japanese equity and bond markets added to concerns. Riskier fixed income products took the brunt of the selling this past week as investors pulled out record amounts from high-yield and emerging-market debt funds.
With little news during the week on earnings or new economic numbers, many investors were looking toward June 19, when the next Fed meeting takes place.
While there was a broad sell-off during the previous week, investors showed a bit more selectivity this time around. Equity funds reported net redemptions of $608 million, and although it was a third consecutive week of outflows, the vast majority of the selling pressure came from select ETFs.
Outflows from iShares MSCI Emerging Market ETF (EEM) (-$2.3 billion) and iShares MSCI Hong Kong ETF (EWH) ($-1.0 billion) helped pull the broader equity ETF group into the red, with total net redemptions of $2.0 billion. At the same time, investors poured roughly $1.2 billion into SPDR S&P 500 ETF (SPY), breaking its three-week losing streak.
On the mutual fund side, equity funds posted their 23rd consecutive week of net inflows at $1.4 billion. Investors added nearly all of the net new exposure to nondomestic products; Lipper’s International Multi-Cap Value Funds (+$905 million) and Emerging Market Equity Funds (+$457 million) classifications split the gains.
Fixed income investors did not show the same perseverance. Taxable bond mutual funds and ETFs reported net outflows of $5.5 billion—for the group’s second consecutive week of net redemptions and its fifth largest redemptions on record. The outflows were nearly split between mutual funds (-$2.7 billion) and ETFs (-$2.8 billion), with a continued exodus from high-yield products driving the redemptions; high-yield mutual funds and ETFs pushed out $3.3 billion for the week. Despite a flight from risk on the fixed income side, investors continued to allocate new cash to bank loan products (+$1.4 billion).
Municipal debt funds—mutual funds and ETFs—reported their third consecutive week of net outflows at $1.6 billion, while money market funds lost nearly $5.2 billion to redemptions.