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August 12, 2016

U.S. Fund-Flows Report: Equity Mutual Funds Suffer Twenty-Second Consecutive Week Of Outflows

by Patrick Keon.

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) experienced net outflows just shy of $800 million for the fund-flows week ended Wednesday, August 10. Equity funds (-$3.8 billion) and money market funds (-$3.0 billion) were responsible for the net outflows, while taxable bond funds (+$5.2 billion) and municipal bond funds (+$871 million) each took in net new money.

The S&P 500 Index finished up for the week, thanks to a stronger-than-expected employment report for the second consecutive month. The S&P 500, coming off two consecutive weekly losses, appreciated 0.8% this past week. The U.S. economy had created 255,000 jobs in July, significantly outdistancing the estimate of 180,000. This news gave investors hope that the economy is healthy, despite the slow growth in GDP that was seen for the first two quarters of the year.

Equity mutual funds continued their slump. The group suffered its twenty-second consecutive week of net outflows (-$4.4 billion this past week). Domestic equity funds continued to be the hardest hit; they saw their coffers shrink $3.3 billion, while nondomestic equity funds had $1.1 billion leave. Equity ETFs (+$586 million) experienced positive flows for the sixth straight week. Receiving the largest net inflows among the ETFs were iShares Russell 2000 ETF (IWM, +$2.0 billion) and SPDR S&P 500 (SPY, +$1.6 billion).

The inflows for taxable bond funds went mostly into ETFs (+$3.5 billion net), and mutual funds benefited from $1.7 billion of net new money. Within the ETF universe high-yield funds (+$1.3 billion) and investment-grade corporate debt products (+$1.0 billion) had the largest positive net flows. For mutual funds investment-grade corporate debt funds dominated the net inflows with $1.5 billion. In comparison, high-yield mutual funds took in $391 million of net new money.

The streak for municipal bond funds hit 45 weeks of positive flows, the third longest of all time, trailing only the 64 weeks related to the global financial crisis (1/7/09–6/23/10) and the 46 weeks from 7/26/06–6/6/07. Muni bond funds took in $781 million this past week to push their total net inflows during the current streak to $27.9 billion. The group had over $50 billion of net inflows during its 64-week streak, but just $18.4 billion during the 46-week streak.

The $3.0 billion of net outflows from money market funds was driven by $11.3 billion leaving funds in Lipper’s Institutional Money Market Funds category. On the plus side Institutional U.S. Government Money Market Funds had net inflows of $9.8 billion.

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