May 5, 2017

U.S. Fund-Flows Weekly Report: Funds Experience Weekly Negative Net Flows of $2.2 Billion

by Patrick Keon.

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) suffered net outflows of $2.2 billion for the fund-flows week ended Wednesday, May 3. Equity funds accounted for the lion’s share of the net outflows; their coffers saw $3.7 billion leave. Money market funds also contributed to the overall negative flows for the week with a net outflow of $302 million. On the plus side the taxable bond funds (+$1.6 billion) and municipal bond funds (+$128 million) macro-groups each took in net new money.

The broad equity market indices were basically flat for the week as the S&P 500 Index managed a small gain (+0.03%) while the Dow Jones Industrial Average retreated slightly (-0.08%). The major economic news of the week again came from the Federal Reserve Board.  The Fed did not raise rates at its meeting this past week but did give indications that the possibility of a rate hike at its next meeting in mid-June is still on the table. The Fed was bullish in its post-meeting statement, writing off the poor showing for Q1 2017 GDP (+0.07%, the worst quarterly number in three years) as being “transitory” as well as stating that inflation was running close to target and that consumer spending and business investment continued to look good.

Equity mutual funds (-$5.3 billion) were responsible for all the net outflows for the equity funds macro-group. It was the sixth straight weekly net outflows for equity mutual funds during which they had total negative flows of almost $23 billion. Continuing the long-term trend, domestic equity funds (-$5.5 billion) were the main contributor to the week’s outflows. Within the domestic equity fund group large-cap diversified equity funds (-$4.7 billion) saw the largest net outflows. Equity ETFs on the other hand had their fourth straight weekly net inflows (+$1.7 billion), with the largest individual positive flows belonging to PowerShares QQQ (QQQ, +$1.4 billion).

Taxable bond mutual funds (+$1.3 billion) accounted for the lion’s share of the positive flows for the taxable bond fund macro-group, while taxable bond ETFs contributed $269 million to the total net inflows. On the mutual fund side Multi-Sector Income Funds (+$777 million) and Core Plus Bond Funds (+$482 million) had the largest net inflows for the week, while iShares iBoxx $IG Corporate Bond ETF (LQD, +$412 million) took in the most net new money for individual ETFs.

Municipal bond mutual funds (+$149 million) had positive net flows for the fourth consecutive week. Funds within the national municipal debt fund categories once again were responsible for the overwhelming majority of the net inflows (+$225 million). Within the national muni sub-group Short Muni Debt Funds (+$182 million) took in the most net new money.

In a somewhat muted result money market funds had net outflows of $302 million. We’ve grown accustomed to seeing movements greater than $1 billion (either outflows or inflows) from this group; in fact this was the first weekly result of less than $1 billion for 2017. The largest net outflows this past week belonged to Institutional U.S. Government Money Market Funds (-$3.4 billion), which was almost balanced out by net inflows into Institutional Money Market Funds (+$1.1 billion), U.S. Government Money Market Funds (+$859 million), and U.S. Treasury Money Market Funds (+$433 million).

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