May 12, 2017

Conventional Fund Investors Still Favor Bond Funds During the Week

by Tom Roseen

Conventional fund (ex-exchange-traded fund [ETF]) investors continued to pump money into taxable bond funds for Thomson Reuters Lipper’s fund-flows week ended May 10, 2017, injecting $2.6 billion for a fourth week of net inflows. Lofty equity valuations, the firing of FBI Director James Comey, and the upcoming OPEC meeting left markets range bound and some investors slightly on the defensive.

For the seventh consecutive week conventional fund investors were net redeemers of equity funds, redeeming $3.8 billion. Domestic equity funds, handing back a little less than $1.8 billion, witnessed their nineteenth week of net outflows despite posting a 0.62% return on average for the flows week; their nondomestic equity fund counterparts, posting a 1.13% return on average, witnessed net outflows (-$2.0 billion) for the third week in four. Geopolitical uncertainties kept many fund investors on the fence.

On the taxable bond fund side corporate investment-grade debt funds (ex-ETFs) witnessed the largest net inflows of the group, taking in $1.9 billion and bringing their year-to-date total to $77.6 billion through the week ended May 10; government-mortgage funds (-$155 million) witnessed the only net redemptions of the group for the week. With investors pricing in the probability of a June rate hike at 83%, according to the CME FedWatch Tool, and import prices on the rise, it wasn’t too surprising to see Lipper’s Inflation-Protected Bond Funds classification taking in net new money for the twenty-seventh consecutive week (+$58 million) and bank loan funds witnessing their twenty-sixth week of net inflows, attracting some $219 million for the week. Year to date Inflation-Protected Bond Funds and bank loan funds attracted $5.7 billion and $12.1 billion net, respectively.

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