January 4, 2019

Lipper U.S. Weekly FundFlows Insight Report: Funds Suffer Net Outflows as Investors Flee Equity Funds and Taxable Bond Funds

by Patrick Keon.

Lipper’s fund asset groups (including both mutual funds and ETFs) experienced net outflows of $25.9 billion for the fund-flows trading week ended Wednesday, January 2. The lion’s share of the net negative flows were attributable to equity funds (-$18.7 billion) and taxable bonds funds (-$12.7 billion), while municipal bond funds (-$599 million) also contributed to the total. Money market funds (+$6.1 billion) were the only fund asset group to take in net new money for the week.

Market Overview

The major indices recovered some of their monthly losses in a volatile week of trading. Light holiday trading volume contributed to this volatility, as did global growth concerns and the still unresolved U.S. government partial shutdown. The Dow Jones Industrial Average (+2.04%), S&P 500 Index (+1.72%), and the NASDAQ Composite Index (+1.70%) all recorded healthy gains for the fund-flows trading week, but this did little to salvage the historical collapses each suffered during the fourth quarter. All three indices had year-to-date gains at the end of the third quarter, but they all suffered significant losses in Q4 (NASDAQ Composite -17.54%, S&P 500 -13.97%, DJIA -11.83%) to push each index into the red for the year (NASDAQ Composite -3.88%, S&P 500 -6.24%, DJIA -5.63%). It was the first time in history that all three indices had year-to-date increases as of the end of Q3 but finished the year in losing territory.

ETFs

ETFs took in net new money (+$1.1 billion) for the eleventh week. Taxable bond ETFs (+$2.8 billion) accounted for most of the net gains, while municipal bond ETFs also contributed $107 million to the total. Conversely, equity ETFs saw $1.8 billion leave their coffers. The largest net inflows among individual taxable bond ETFs belonged to iShares iBoxx $High Yield Bond ETF (HYG, +$972 million) and iShares Short Treasury Bond ETF (SHV, +$816 million), while the largest net outflows for equity ETFs belonged to SPDR S&P 500 ETF (SPY, -$8.4 billion).

Equity Mutual Funds

Equity mutual funds experienced negative net flows (-$16.9 billion) for the twenty-eighth consecutive week. Both domestic equity funds (-9.5 billion) and nondomestic equity funds (-$7.4 billion) saw money leave their coffers this week. Taking a more granular look, the largest net outflows by Lipper fund classification belonged to the Equity Income Funds (-$1.2 billion) and International Large-Cap Growth Funds (-$1.0 billion) peer groups.

Fixed Income Mutual Funds

Both the taxable bond (-$15.5 billion) and muni debt (-$706 million) mutual fund groups experienced net outflows for the week. On the taxable bond fund side, investors continued to flee below investment grade debt as Loan Participation Funds (-$2.1 billion) and High Yield Funds (-$1.2 billion) had the largest net outflows. Intermediate Muni Debt Funds (-$453 million) had the largest net outflows for the tax-exempt peer groups.

Money Market Mutual Funds

Money market funds (+$6.1 billion) experienced net inflows for the fourth straight week. The U.S. Government Money Market Funds (+$10.0 billion) and Money Market Instrument Funds (+$6.2 billion) peer groups paced the net positive flows, while Institutional U.S. Government Money Market Funds had the largest net outflows at $11.9 billion.

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