March 9, 2018

U.S. Fund-Flows Weekly Report: Funds Experience Overall Net Inflows, Driven by Money Market Funds

by Patrick Keon.

Thomson Reuters Lipper’s fund asset groups (including both mutual funds and ETFs) took in net new money of $2.4 billion for the fund-flows week ended Wednesday, March 7. The net inflows were driven by money market funds (+$12.7 billion) and municipal bond funds (+$407 million), while equity funds (-$9.8 billion) and taxable bond funds (-$898 million) saw money leave.

Market Overview

The equity markets suffered through another volatile week, thanks to U.S. President Donald Trump’s announcing he would seek to impose tariffs of 25% on imported steel and 10% on aluminum. This news sent the markets into a tailspin; the Dow Jones Industrial Average and the S&P 500 Index fell 1.68% and 1.33%, respectively, the day the tariffs were announced (March 1). For the fund-flows trading week the Dow retreated 0.91% and the S&P 500 gained 0.48%. The tariff news dominated the week as the administration tried to convince the public the tariffs would protect the U.S. steel and aluminum industries, while critics said this move could potentially create a trade war with China. There was much internal debate within the White House about whether the U.S. should move forward with the plan, and it was speculated that Gary Cohn, Trump’s top economic adviser, had resigned in the wake of the announcement because he is against tariffs.

ETFs

ETFs suffered net outflows (-$12.6 billion) for the fourth week in five. The lion’s share of the negative net flows came from equity ETFs (-$10.2 billion), while taxable bond ETFs and muni bond ETFs contributed $2.4 billion and $98 million, respectively, to the outflows. SPDR S&P 500 ETF (SPY, -$10.5 billion) dominated the net outflows from equity ETFs, while iShares Core U.S. Aggregate Bond ETF (AGG) recorded the largest net-negative flows (-$1.5 billion) on the taxable bond ETF side of the ledger.

Equity Mutual Funds

Equity mutual funds had net-positive flows (+$323 million) for the week. Nondomestic equity funds (+$2.0 billion) were responsible for all the net inflows, while domestic equity funds (-$1.6 billion) saw money leave their coffers. The largest net inflows among nondomestic equity funds belonged to Lipper’s International Multi-Cap Core Funds peer group (+$459 million), and the largest net-negative flows for domestic equity funds were attributable to Equity Income Funds (-$554 million).

Fixed Income Mutual Funds

Taxable bond mutual funds (+$1.5 billion) and municipal bond mutual funds (+$505 million) both had net inflows for the week. For taxable bond funds the Loan Participation Funds (+$547 million) and Multi-Sector Income Funds (+$438 million) peer groups led the net-positive flows, while for muni bond funds Intermediate Muni Debt Funds (+$193 million), General Muni Debt Funds (+$170 million), and High Yield Muni Debt Funds (+$169 million) were responsible for the majority of the net inflows.

Money Market Mutual Funds

Money market mutual funds took in $12.7 billion of net new money for the week. The largest net inflows for the week belonged to Institutional U.S. Government Money Market Funds (+$9.0 billion), while Institutional Money Market Funds experienced net outflows of $2.1 billion.

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