January 20, 2017

U.S. Fund-Flows Weekly Report: U.S. Funds Continue Their Losing Streak

by Patrick Keon

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) saw over $19 billion leave their coffers for the fund-flows week ended Wednesday, January 18. This marked the third straight weekly net outflows for U.S. funds; they have failed to post an increase yet in 2017. Money market funds (-$18.0 billion) and equity funds (-$3.1 billion) accounted for all the weekly net outflows, while taxable bond funds (+$1.5 billion) and municipal bond funds (+$512 million) both managed to take in net new money.

The broad-based equity indices took a downturn during the week as investors started to question some of President-Elect Donald Trump’s recent statements. The Dow Jones Industrial Average retreated 0.8% for the week, while the S&P 500 Index lost 0.2%. In an interview with the Wall Street Journal Trump stated that the U.S. is at a competitive disadvantage with China because the dollar is too strong compared to the yuan. Trump’s talking down the currency had the double-edged effect of driving down both the dollar (which had appreciated roughly 5% for Q4 2016) and the equity markets.

For equity funds both ETFs (-$2.3 billion) and mutual funds (-$729 million) contributed to the net outflows for the week. SPDR S&P 500 (SPY, -$2.3 billion) was the largest individual contributor to the negative flows for equity ETFs, while mutual funds were hurt again by the results from the domestic equity funds group. Domestic equity funds suffered net outflows of $1.2 billion for the fund-flows week, while nondomestic equity funds took in $427 million of net new money. The largest net outflows among domestic equity funds belonged to funds in Lipper’s Large-Cap Growth Funds (-$592 million) and Large-Cap Core Funds (-$408 million) peer groups.

Mutual funds (+$2.0 billion) were responsible for all of the net inflows for taxable bond funds, while taxable bond ETFs saw $540 million leave. Investors continued to pour money into bank loan mutual funds; the group took in a net $491 million for the week, pushing its post-election net inflows total to $7.1 billion. The second largest positive flows for mutual funds belonged to the Short Investment-Grade Debt Funds group, with a net inflow of $462 million. The largest individual net outflows for taxable bond ETFs belonged to two high-yield products: iShares iBoxx $ High Yield Corporate Debt (HYG, -$870 million) and SPDR Bloomberg Barclays High Yield Bond (JNK, -$349 million).

Muni bond mutual funds (+$545 million) experienced their second consecutive week of positive net flows. Also for the second week in a row high-yield muni debt funds were the main reason for the positive flows; they took in $421 million of net new money after posting a net inflow of $770 million the prior week.

Money market funds saw almost $18 billion leave their coffers this past week, for the group’s third straight weekly net outflows. Lipper’s Institutional U.S. Government Money Market Funds (-$10.0 billion) and Institutional U.S. Treasury Money Market Funds (-$6.2 billion) classifications accounted for the bulk of the group’s net outflows.

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