January 18, 2019

Lipper U.S. Weekly FundFlows Insight Report: Funds Suffer Net Outflows Driven by Money Market Funds

by Patrick Keon.

Lipper’s fund asset groups (including both mutual funds and ETFs) experienced net outflows of $14.2 billion for the fund-flows trading week ended Wednesday, January 16. Money market funds (-$15.0 billion) were responsible for the majority of the net negative flows as investors put money back to work. Equity funds (-$4.4 billion) also contributed to the overall net outflows, while taxable bond funds and municipal debt funds had net inflows of $4.3 billion and $946 million, respectively.

Market Overview

The major equity indices continued to rebound from their fourth quarter slump as the Dow Jones Industrial Average (+1.37%), S&P 500 Index (+1.20%), and the NASDAQ Composite Index (+1.12%) all closed the fund-flows trading week with significant gains. The NASDAQ, S&P 500, and the Dow have now appreciated 6.02%, 4.36%, and 3.77% year-to-date after retreating 17.54%, 13.97%, and 11.83%, respectively, in Q4. The markets took strength from several sources this week. First, Federal Reserve Chairman Jerome Powell stated that the Fed would be patient on its interest rate policy as inflation is currently low and stable. Later in the week, the technology and internet sectors got a boost from Netflix announcing that it planned to raise subscription fees. Lastly, strong corporate earnings from Bank of America and Goldman Sachs kept the rally going at the end of the week.

ETFs

ETFs suffered net outflows of $6.3 billion, breaking a run of 12 straight weekly net inflows. The lion’s share of the net outflows were attributable to equity ETFs (-$9.2 billion), while muni bond ETFs contributed $306 million to the total net outflows. Taxable bond ETFs took in $3.2 billion in net new money for the week. The largest individual net outflows among equity ETFs belonged to SPDR S&P 500 ETF (SPY, -$2.8 billion) and iShares Russell 2000 ETF (IWM, -$1.2 billion). iShares iBoxx $Investment Grade Bond ETF (LQD, +$1.0 billion) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, +$958 million) had the most significant net positive flows on the taxable bond ETF side of the ledger.

Equity Mutual Funds

After twenty-eight straight weeks of net outflows, equity mutual funds (+$4.8 billion) took in net new money for the second straight week. Both domestic equity mutual funds (+$2.6 billion) and nondomestic equity mutual funds (+$2.2 billion) contributed to the net inflows. Taking a deeper dive with the data shows that the Large-Cap Core Funds (+$513 million) and Emerging Markets Funds (+$797 million) classifications had the largest net positive flows for the domestic and nondomestic groups.

Fixed Income Mutual Funds

Both the muni debt (+$1.3 billion) and taxable bond (+$1.1 billion) mutual fund groups experienced net inflows for the week. For muni debt funds, the Intermediate Muni Debt Funds (+$420 million) and High Yield Muni Debt Funds (+$411 million) peer groups took in the most net new money. On the taxable bond fund side, High Yield Funds (+$1.6 billion) had the largest net inflows.

Money Market Mutual Funds

Money market funds (+$15.0 billion) experienced net inflows for the week. The Institutional U.S. Treasury Money Market Funds (-$14.5 billion) were responsible for most of the net outflows while Institutional Money Market Funds had net positive flows of $3.1 billion.

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