May 5, 2017

Lipper U.S. Weekly Fund Flows – Chart of the Week – Investors Flee Natural Resources Funds as Oil Prices Plunge

by Patrick Keon

Natural resources funds ((including both mutual funds and exchange-traded funds [ETFs]) have suffered net outflows of over $1.2 billion for the year to date. This represents a reversal of a long-term trend; natural resources funds had not experienced an annual net outflow since 2006, and the group’s four largest annual net inflows occurred from 2013–2016, for a total positive net flow of $27.6 billion for the period.

Approximately half (-$621 million) of the year-to-date net outflows from the natural resources peer group have been recorded since the end of the first quarter. This activity aligns with a slump in U.S. oil prices: WTI Crude closed at a recent high of $53.40 on April 11 but since then has plunged 14.8% to close at $45.52 on May 4. Oil prices have been driven down by a combination of record-high inventories and refiners ramping up production to the highest level in over 30 years as the spreads between the cost to buy crude and the price at which oil can be sold increase.

Four funds have accounted for the lion’s share of the net outflows the natural resources peer group has seen for the year to date. The largest negative net flow (-$1.1 billion) belongs to an ETF, First Trust Energy AlphaDEX Fund (FXN). Another ETF, PowerShares DWA Energy Momentum Portfolio (PXI, -$132 million), had the third largest net outflow for the group. The four most negative flows are rounded out with two Fidelity mutual funds: Fidelity Select Energy Portfolio and Fidelity Select Natural Gas Portfolio had $211.5 million and $130.6 million leave, respectively.

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