June 29, 2018

U.S. Fund-Flows Weekly Report: Equity Funds Suffer Second Worst Net Outflows of 2018

by Patrick Keon.

Thomson Reuters Lipper’s fund asset groups (including both mutual funds and ETFs) had net outflows of just over $900 million for the fund-flows week ended Wednesday, June 27. Equity funds were responsible for all the week’s net outflows—$20.0 billion left their coffers. These negative flows were the group’s second largest of the year, trailing only the $23.9 billion of net outflows for the fund-flows week ended February 7. The other asset groups were all on the plus side of the ledger this past week; money market funds, taxable bond funds, and municipal bond funds took in $18.2 billion, $510 million, and $421 million of net new money, respectively.

Market Overview

Both the S&P 500 Index (-2.45%) and the Dow Jones Industrial Average (-2.19%) lost ground for the second consecutive fund-flows trading week. The indices were hurt by continuing trade tensions with two of the United States’ most significant trading partners, China and the European Union. President Trump brought the EU into the fray with a tweet threatening a 20% tariff on imports of European cars. The tensions caused uncertainty around the globe; there was speculation that a trade war with one or more of its partners could push the U.S. into a recession. There was some thought the U.S. economy is approaching the end of its expansionary phase in the current business cycle.

ETFs

ETFs had net outflows (-$9.6 billion) for the fourth straight week. These net outflows were once again attributable to the equity ETF group (-$12.1 billion). The largest net outflows among equity ETFs belonged to SPDR S&P 500 ETF (SPY, -$4.2 billion) and iShares MSCI Emerging Markets ETF (EEM, -$1.5 billion). Taxable bond ETFs (+$2.2 billion) and municipal bond ETFs (+$217 million) both had net inflows for the week. For taxable bond ETFs the largest net inflows belonged to iShares iBoxx $Investment Grade Corporate Bond ETF (LQD, +$620 million), while iShares National Municipal Bond ETF (MUB, +$163 million) led the net inflows for the municipal bond funds group.

Equity Mutual Funds

Equity mutual funds saw almost $8 billion net leave their coffers during the past week. The net outflows were attributable to both domestic equity funds (+$6.9 billion) and nondomestic equity funds (-$1.0 billion).

Fixed Income Mutual Funds

The results from the fixed income groups were mixed: municipal bond mutual funds (+$204 million) had net inflows, while taxable bond mutual funds saw $1.7 billion net leave. The majority of the net inflows for muni bond funds belonged to the High Yield Muni Debt (+$155 million) peer group, while for taxable bond funds the largest net outflows came from Core Bond Funds (-$868 million).

 Money Market Mutual Funds

Money market funds took in $18.2 billion of net new money for the week. The largest net inflows belonged to the Institutional U.S. Government Money Market Funds (+$13.9 billion) and Institutional U.S. Treasury Money Money Market Funds (+$8.4 billion) peer groups.

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