by Patrick Keon.
Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and ETFs) experienced net-negative flows of $9.8 billion for the fund-flows week ended Wednesday, September 20. All the weekly net outflows were attributable to money market funds (-$18.2 billion); every other fund macro-group took in net new money. Taxable bond funds (+$7.0 billion) were responsible for the lion’s share of the net-positive flows, while equity funds and municipal bond funds contributed $803 million and $574 million, respectively, to the total net inflows.
The Dow Jones Industrial Average (+1.15%) and the S&P 500 Index (+0.40%) both captured performance gains for the fund-flows trading week. Nearing the end of Q3 2017, the Dow and the S&P 500 have appreciated 13.41% and 12.03%, respectively, for the year to date. The big news for the week came from the Federal Reserve’s two-day policy meeting. The Fed left interest rates unchanged for now but did indicate it believes a rate hike in December will be appropriate if current conditions hold. This was announced in spite of continued weak inflation data; Fed Chair Janet Yellen stated at the post-meeting press conference that the lack of inflation remains a mystery to the Fed. The Fed also announced that it will begin unwinding in October its $4.5-trillion balance sheet in a gradual and predictable manner. The Fed’s bloated balance sheet, which was less than $1 trillion prior to 2008, is the result of its extended quantitative-easing program following the global financial crisis.
ETFs (+$4.9 billion) experienced net inflows for the eleventh consecutive week. All three ETF macro-groups took in net new money, paced by equity ETFs (+$3.1 billion), with taxable bond ETFs and municipal bond ETFs contributing $1.8 billion and $27 million, respectively. For equity ETFs iShares Russell 2000 (IWM, +$2.0 billion) and PowerShares QQQ (QQQ, +$741 million) contributed the two largest net-positive flows. The largest net inflows among the taxable bond ETF group belonged to iShares 20+ Year Treasury Bond ETF (TLT, +$728 million).
Equity Mutual Funds
Marking their thirteenth consecutive week of net outflows, equity mutual funds saw $2.3 billion leave their coffers. Following the long-term trend, domestic equity funds (-$4.0 billion) were responsible for all the net-negative flows, while nondomestic equity funds had net inflows of $1.7 billion. The largest net outflows among domestic equity funds belonged to Lipper’s Large-Cap Growth Funds peer group (-$1.1 billion), while the largest net-positive flows for nondomestic equity funds were the $497 million taken in by the International Multi-Cap Core Funds peer group.
Fixed Income Mutual Funds
Both taxable bond (+$5.3 billion) and municipal bond (+$547 million) mutual funds took in net new money for the week. The largest net inflows within the taxable bond fund macro-group belonged to Core Plus Bond Funds (+$807 million) and Core Bond Funds (+$782 million). The largest net inflows for municipal bond funds were attributable to the Short Muni Debt Funds (+$195 million) peer group.
Money Market Mutual Funds
Money market mutual funds suffered net outflows of approximately $18.2 billion for the week. The Institutional U.S. Government Money Market Funds (-$14.2 billion) and Institutional U.S. Treasury Money Market Funds (-$5.1 billion) peer groups were the largest contributors to the week’s net outflows.
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