June 22, 2018

U.S. Fund-Flows Weekly Report: Money Market Funds Suffer Significant Net Outflows

by Patrick Keon.

Thomson Reuters Lipper’s fund asset groups (including both mutual funds and ETFs) had net-negative flows of $51.6 billion for the fund-flows week ended Wednesday, June 20. The week’s net outflows were driven by money market funds, which saw over $51 billion leave their coffers. This represented the money market fund group’s seventh largest net outflows of all-time and its largest since 2011. These net outflows were a function of U.S. corporations withdrawing cash to pay their quarterly tax bill and investors settling their accounts from the previous week’s Treasury auction. Among the other asset groups municipal bond funds and taxable bond funds had net inflows of $646 million and $94 million, while equity funds experienced net outflows of $1.3 billion.

Market Overview

The Dow Jones Industrial Average and the S&P 500 Index both were in the red for the fund-flows trading week; the indices closed down 2.16% and 0.30%, respectively. The Dow lost ground during every trading session of the week, while it was three for five for the S&P 500. Both indices suffered the majority of their weekly losses on Tuesday, June 19, as the trade war of words between the U.S. and China flared up again. U.S. President Donald Trump threatened to impose a 10% tariff on $200 billion worth of goods from China, and China responded that it would return the favor if the tariffs were imposed. This news sent the Dow spiraling downward (-1.2% for the day), while the losses from the S&P 500 (-0.40%) were somewhat more muted.

ETFs

ETFs had net outflows (-$5.4 billion) for the third straight week, driven by the equity ETF group (-$5.8 billion). The largest net outflows among equity ETFS belonged to iShares MSCI Emerging Markets (EEM, -$3.3 billion) and iShares MSCI EAFE ETF (EFA, -$1.9 billion). Municipal bond and taxable bond ETFs took in net new money of $410 million and $8 million for the week. iShares National Muni Bond ETF (MUB, +$315 million) paced the net inflows for the municipal bond fund group.

Equity Mutual Funds

Equity mutual funds took in $4.6 billion of net new money for the week. The positive net flows were attributable to nondomestic equity funds (+$6.6 billion), while domestic equity funds (-$2.1 billion) had net-negative flows.

Fixed Income Mutual Funds

Municipal bond mutual funds (+$236 million) and taxable bond mutual funds (+$85 million) both had net inflows for the week. The largest net inflows for muni debt funds belonged to the High Yield Muni Debt Funds peer group (+$219 million), while for taxable bond funds Core Bond Funds took in $458 million of net new money.

Money Market Mutual Funds

The near-record level of net outflows for money market mutual funds was paced by the Institutional U.S. Government Money Market Funds (-$39.3 billion) and Institutional U.S. Treasury Money Money Market Funds (-$11.9 billion) peer groups.

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