June 2, 2017

U.S. Fund-Flows Weekly Report: Funds Grow Their Coffers by $13.1 Billion

by Patrick Keon

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) took in $13.1 billion of net new money for the fund-flows week ended Wednesday, May 31. Equity funds (+$9.2 billion), with their first positive flow in five weeks, were responsible for the lion’s share of the overall net inflows, while money market funds and taxable bond funds contributed $2.5 billion  and $1.4 billion, respectively. It was the eleventh straight weekly net inflows for taxable bond funds and the fourth for money market funds. The only group seeing money leave for the week was municipal bond funds. The net outflow of $51 million for muni bond funds broke a streak of seven straight weekly net inflows.

Weekly Synopsis

The equity market indices closed the fund-flows week ended May 31, 2017, by trending downward. The S&P 500 Index (+0.44%) and the Dow Jones Industrial Average (+0.34%) both posted gains on the first trading day, but both indices ended the week with two consecutive losing sessions. This retreat reduced the S&P 500’s increase for the week to 0.31%, while it caused the Dow to fall into the red (-0.02%). The strength at the start of the week could be attributed to strong quarterly earnings (especially for Best Buy) and the release of the current Federal Open Market Committee meeting minutes, which pointed to a gradual unwinding of the quantitative easing debt on the Fed’s balance sheet. The markets were hampered at the end of the trading week by a slump in oil prices (and therefore a decline in energy sector stocks) and a dip in financial stocks as both the Bank of America and JP Morgan warned of weak revenues for second quarter 2017. Also, another potential scandal from President Donald Trump’s administration (news broke that Trump’s son-in-law and senior advisor Jared Kushner had considered, during the presidential transition, setting up a secret channel of communication with Russia) continued to act as an albatross on the markets.

Exchange-Traded Funds

ETFs were responsible for the overwhelming majority of the net inflows for the week; they took in $12.5 billion of net new money. Equity ETFs, with a net inflow of $10.1 billion, accounted for the majority of this increase. Domestic equity ETFs had net inflows of $7.6 billion, and nondomestic equity ETFs grew their coffers by $2.5 billion. SPDR S&P 500 (SPY) individually took in over $5.3 billion of net new money, while PowerShares QQQ (QQQ) contributed $903 million to the group’s inflows. Taxable bond ETFs had positive flows of $2.3 billion for the fund-flows week. The largest individual contributors to this total were SPDR Bloomberg Barclays High Yield ETF (JNK) and iShares iBoxx $ Investment Grade Corporate (LQD), which had positive net flows of $727 million and $454 million, respectively.

Conventional Equity Funds

Equity mutual funds (-$915 million) suffered their tenth straight weekly net outflows. Domestic equity funds (-$1.7 billion) were responsible for all of the net outflows this past week, while nondomestic equity funds had net inflows of $740 million. The outflows were widespread among the domestic equity group, with the largest belonging to the Large-Cap Core Funds peer group, which saw almost $370 million leave.

Conventional Fixed Income Funds

Taxable bond mutual funds experienced net outflows of $947 million, stopping a run of six straight weekly net inflows. The largest outflows among the group belonged to High Yield Funds, which had negative flows of $617 million. Municipal bond funds (-$115 million) also suffered net outflows for the week, breaking their streak of seven straight net inflows. Outflows from Intermediate Muni Debt Funds (-$80 million) and General Muni Debt Funds (-$57 million) were the major reasons for the group’s negative flows.

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