August 10, 2017

U.S. Fund-Flows Weekly Report: Funds Experience Largest Weekly Net Inflows for the Year to Date

by Patrick Keon

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and ETFs) took in $32.0 billion of net new money for the fund-flows week ended Wednesday, August 9. This represented the largest weekly net inflows of the year, outdistancing the $24.0 billion of net inflows for the fund-flows week ended April 26. Money market funds (+$30.9 billion) paced the charge with their largest weekly net inflows of the year, while taxable bond funds (+$3.3 billion) and municipal bonds funds (+$631 million) also contributed to the total net inflows. Equity funds (-$2.8 billion) saw money leave their coffers for a fourth straight week.

Market Overview

The Dow Jones Industrial Average recorded a gain of 0.15%, while the S&P 500 Index retreated 0.14% for the fund-flows trading week. A mixed week of news impacted the markets. Geopolitical issues weighed on the markets in the latter half of the week as U.S. President Donald Trump and North Korea engaged in a round of saber rattling. A string of positive economic news releases acted as a counterbalance to the North Korean turmoil, including weekly unemployment claims falling 5,000, monthly nonfarm payrolls adding 209,000 jobs, and wages increasing for the second straight month (average hourly earnings appreciated 0.3% for July after rising 0.2% for June). This data represented signs of a strengthening economy and appeared to put the Federal Reserve on track to announcing plans to start trimming the bond portfolio left over from its quantitative-easing program following the global financial crisis. However, interest rate hikes remained in doubt; the Fed did not expect inflation to climb to its target 2.0% rate in the near future.

ETFs

ETFs had net inflows (+$3.2 billion) for the fifth consecutive week. Equity (+$1.7 billion) and taxable bond (+$1.4 billion) ETFs were responsible for the majority of the net inflows, while municipal bond ETFs kicked in $160 million of net new money. The net inflows for equity ETFs were fairly evenly split between nondomestic (+$1.0 billion) and domestic (+$701 million) ETFs. The largest positive flows for taxable bond funds belonged to Lipper’s Corporate Debt BBB-Rated ETFs (+$585 million) and Core Bond ETFs (+$460 million) peer groups. General & Insured Municipal Debt ETFs took in $139 million of net new money.

Equity Mutual Funds

Equity mutual funds suffered net outflows (-$4.5 billion) for the seventh consecutive week. Domestic equity funds (-$5.0 billion) were responsible for all the net-negative flows, while nondomestic equity funds had net inflows of $541 million.

Fixed Income Mutual Funds

Taxable bond mutual funds had positive net flows of $1.9 billion for the week. The positive flows were driven by the Core Plus Bond Funds (+$771 million) and Multi-Sector Income Funds (+$258 million) peer groups. Municipal bond funds had net inflows (+$471 million) for the fourth consecutive week, led by High Yield Muni Debt Funds (+$142 million).

Money Market Mutual Funds

Money market funds had their highest weekly net inflows (+$30.9 billion) for the year to date. Money market funds have taken in net new money for three straight weeks for total net inflows of $59.6 billion. The largest net inflows by peer group for this past week belonged to Institutional U.S. Government Money Market Funds (+$13.4 billion), Institutional Money Market Funds (+$7.9 billion), and Institutional U.S. Treasury Money Market Funds (+$7.6 billion).

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