July 20, 2017

U.S. Fund-Flows Weekly Report: Funds Suffer Net Outflows for the Fifth Week in Six

by Patrick Keon

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and ETFs) experienced negative net flows of $272 million for the fund-flows week ended Wednesday, July 19. The net outflows were driven by money market funds (-$5.6 billion) and equity funds (-$2.6 billion). Taxable bond funds (+$7.6 billion) and municipal bond funds (+$299 million) both took in net new money. The $7.6 billion of positive flows for taxable bond funds was the group’s second largest weekly net inflows for the year to date, trailing only the $8.3 billion of net inflows for the fund-flows week ended March 22.

Market Overview

The S&P 500 Index (+1.25%) and the Dow Jones Industrial Average (+0.50%) both recorded gains for the second straight fund-flows week of trading. The markets took strength from weak economic data and a better-than-expected corporate earnings season to date. Following Federal Reserve Chair Janet Yellen’s comments the prior week that the Fed will be paying close attention to recent weakness in inflation data, almost as if on cue data released this past week showed retail sales dropping for the second consecutive month and the consumer price index staying unchanged. This weak economic data spread doubt among investors that the Fed would try for a third interest rate hike later this year. Morgan Stanley announced stronger-than-anticipated earnings on the last trading day of the week, which provided the impetus for both the Dow and the S&P 500 to close at new record highs. The S&P 500 was also helped by the 21% spike in the price of Vertex Pharmaceutical shares. Vertex’s price was driven higher by the announcement of the results from its Cystic Fibrosis testing, which were much better than the Street expected.

ETFs

ETFs had positive net flows of $3.9 billion for the week—for their second consecutive weekly increase. Taxable bond ETFs (+$4.6 billion) were responsible for almost all the net inflows, while municipal bond ETFs chipped in $8 million of the total. Equity ETFs had net outflows of just over $750 million. ETFs in Lipper’s High Yield peer group took in the most net new money (+$2.0 billion) in the taxable bond funds group, followed by Corporate Debt BBB-Rated ETFs (+$1.1 billion) and Short U.S. Treasury ETFs (+$802 million). The largest individual net outflows among equity ETFs belonged to SPDR S&P 500 (SPY, -$3.6 billion) and iShares Russell 2000 ETF (IWM, -$1.4 billion).

Equity Mutual Funds

Equity mutual funds suffered net outflows (-$1.8 billion) for a fourth straight week. The outflows were once again driven by domestic equity funds (-$2.4 billion), while nondomestic equity funds took in almost $600 million of net new money.


Fixed Income Mutual Funds

Taxable bond mutual funds had net inflows of just over $3.0 billion for the week. The positive results were driven by funds in the following peer groups: Core Plus Bond Funds (+$732 million), Short Investment-Grade Debt Funds (+$662 million), and Multi-Sector Income Funds (+$408 million). Municipal bond mutual funds had net inflows of $291 million, driven by High Yield Muni Debt Funds (+$121 million) and General Muni Debt Funds (+$88 million).

Money Market Mutual Funds

Money market funds suffered net outflows of $5.6 billion for the week. The Institutional U.S. Government Money Market Funds (-$6.9 billion) peer group was responsible for the lion’s share of the group’s net outflows.

 

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