April 12, 2018

U.S. Weekly FundFlows Insight Report: Despite Big Market Swings, Investors Are Net Purchasers of Long-Term Fund Assets for the Week

by Tom Roseen

Photo Source: Kyodo/via REUTERS

For the first week in five investors were net purchasers of fund assets (including those of conventional funds and ETFs), injecting a little less than $3.0 billion. While fund investors were net redeemers of money market funds (-$9.0 billion) and municipal bond funds (-$245 million), they padded the coffers of taxable bond funds (+$6.5 billion) and equity funds (+$5.7 billion) for the fund-flows week ended April 11, 2018.

Market Wrap-Up

Bipolar swings over trade war concerns, rising geopolitical tensions after a suspected chemical attack in Syria, and an FBI raid on President Donald Trump’s personal lawyer’s office kept market returns on the volatile side. For the fund-flows week the Dow Jones Industrial Average Price Only Index (-0.31%) witnessed the largest decline of the broad-based indices. However, the Russell 2000 Price Only Index (+0.99%) and the NASDAQ Composite Price Only Index (+0.38%) managed to post plus-side returns. The overseas indices were bolstered later in the flows week as Chinese President Xi said he was committed to opening trade negotiations and relaxing trade restrictions. The FTSE 100 Price Only Index (+4.06%), the Xetra DAX Total Return Index (+3.53%), and the Shanghai Composite Price Only Index (+2.70%) posted strong returns for the week.

Markets started out on a positive note on the first day of the fund-flows week as the trade war fears between the U.S. and China eased. Investors began looking toward the start of the Q1 earnings reporting season, which is expected by many pundits to be fairly strong. The markets generally shrugged off news that U.S. jobless claims had risen 24,000 to 242,000 the week prior. However, following news that Trump had asked the U.S. Trade Representative to consider adding an extra $100 billion to the Chinese tariffs list, the equity markets were pummeled, with the Dow witnessing a 572.56 point down day. In addition, investors were mildly disappointed by news that the U.S. economy had added only 103,000 jobs for March, missing analyst expectations of 170,000.

On Monday, April 9, the markets initially rallied after Trump tweeted his optimism that China would make the right move concerning tariffs. However, the markets sold off late in the day—still remaining in positive territory—as the New York Times reported the FBI had raided and confiscated documents from the office of Michael Cohen, Trump’s personal lawyer. The Dow witnessed another triple-digit upside day (+428.90) on Tuesday after President Xi announced that Beijing plans to give foreign companies greater access to the financial and manufacturing sectors, easing some of the trade war rhetoric. However, on the last day of the fund-flows week the Dow witnessed a 218-point decline as Trump suggested he was considering a military strike in Syria after a suspected Assad-led chemical weapons attack in the rebel-held town of Douma over the weekend killed an estimated 43 civilians and injured hundreds more. Gold and oil futures closed at their highest levels since January 2016 and December 2014, respectively, over oil supply disruptions and geopolitical concerns.

Exchange-Traded Equity Funds                                                                      

For the first week in four equity ETFs witnessed net inflows, taking in a little less than $6.1 billion for the flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$5.7 billion), adding money to the group also for a first week in four. For the second week in a row nondomestic equity ETFs witnessed net purchases, this past week attracting $369 million. SPDR S&P 500 ETF (+$2.9 billion), iShares Russell 2000 ETF (+$877 million), and SPDR Dow Jones Industrial Average ETF (+$447 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum Consumer Staples Select Sector SPDR ETF (-$661 million) experienced the largest individual net redemptions, and iShares MSCI EAFE ETF (-$642 million) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the third consecutive week taxable fixed income ETFs witnessed net inflows, this past week attracting some $5.6 billion. APs padded the coffers of corporate investment-grade debt ETFs (+$2.7 billion net) and government-Treasury ETFs (+$1.9 billion net). iShares Short Treasury Bond ETF (+$1.0 billion) and iShares iBoxx $ Investment Grade Corporate Bond ETF (+$878 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs, while SPDR Bloomberg Barclays Short Term High Yield Bond ETF (-$255 million) handed back the largest individual net redemptions for the week. For the fifth week in a row municipal bond ETFs attracted net new money, this past week taking in $127 million.

Conventional Equity Funds

For the third week in a row conventional fund (ex-ETF) investors were net sellers of equity funds, redeeming $346 million. Domestic equity funds, handing back a little less than $1.6 billion, witnessed their seventh consecutive weekly net outflows while posting a 0.27% return on average for the flows week. Meanwhile, their nondomestic equity fund counterparts, posting a 1.10% gain on average, witnessed their fourth consecutive week of net inflows (+$1.2 billion). On the domestic equity side fund investors shunned large-cap funds (-$0.7 billion net), while on the nondomestic equity side investors were net purchasers of international equity funds (+$1.1 billion).

Conventional Fixed Income Funds

For the first week in three taxable bond funds (ex-ETFs) witnessed net inflows, taking in $891 million this past week. Fund investors padded the coffers of corporate investment-grade debt funds (+$632 million) and international & global debt funds (+$267 million) but were net redeemers of balanced funds (-$135 million) and government mortgage funds (-$81 million) for the week. Thomson Reuters Lipper’s Inflation-Protected Bond Funds classification witnessed its fourth straight week of net redemptions, handing back $21 million this past week. Bank loan funds (+$251 million) witnessed their sixth consecutive week of net inflows. For the second week in a row municipal bond funds (ex-ETFs) witnessed net outflows, handing back $372 million while posting a gain of 0.12% on average for the fund-flows week.

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