Lipper Fund Flows: Money Markets Gain While China Surprises

By | August 15, 2015

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Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds) had aggregate net inflows of $4.9 billion for the fund-flows week ended Wednesday, August 12. This marked the second consecutive week of overall positive net flows and the fourth week in the past six. Every group except taxable bond funds (-$2.0 billion) took in net new money. Money market funds (+$6.0 billion) paced the groups in net inflows and were followed by equity funds (+$936 million) and municipal bond funds (+$11 million). In market activity, the Dow Jones Industrial Average closed down 0.79% (-137.96 points), while the S&P 500 Index retreated 0.66% (-13.79 points) on the week. It was a volatile week of trading, with the Dow experiencing three days of triple-digit moves (two down and one up) and another day that saw it recoup almost all of its more-than-270-point intraday loss to close the day down less than one point. A good deal of the market’s uncertainty was triggered by China’s surprise move to devalue its currency on two consecutive days (August 11 and 12). China made these moves in response to a string of recent economic data that indicated the world’s second largest economy is slowing. The first devaluation shook the U.S. equity markets, with the Dow and S&P 500 closing down 1.2% and 1.0%, respectively, in direct response to the news. After the second currency devaluation, the Dow and the S&P continued their descent from the previous day, but both bounced back to finish virtually unchanged. The market rebounded on speculation the Federal Reserve might push back its highly anticipated September interest rate hike in response to fears that China might devalue its currency further as well as on buying of some recently oversold issues (Apple, energy stocks). The $6.0 billion of net positive flows into money market funds represented their second consecutive week and the seventh of the last nine weeks of taking in net new money. This streak reduced the group’s net outflows for the year to date to $55.0 billion. Institutional money market funds were responsible for $11.2 billion of the group’s net inflows for the week. For equity funds, ETFs accounted for the bulk of the net inflows (+$646 million) for the week, while mutual funds benefited from $290 million of the positive flows. The two largest individual net inflows for ETFs belonged to Deutsche X-trackers MSCI EAFE Hedged Equity ETF ((NYSEARCA: DBEF ), +$562 million) and Utilities Select Sector SPDR Fund ((NYSEARCA: XLU ) , +$382 million ) . Following the trend we’ve seen for most of 2015 among mutual funds, nondomestic equity funds (+$1.1 billion) took in net new money for the week, while domestic equity funds (-$466 million) saw money leave their coffers. ETFs were responsible for the majority of the net outflows (-$1.3 billion) for taxable bond funds, while mutual funds saw $759 million leave. The data indicated investors were running away from high yield in both mutual funds and ETFs. iShares iBoxx $ High Yield Corporate Bond ETF ((NYSEARCA: HYG ), -$524 million) and SPDR Barclays High Yield Bond ETF ((NYSEARCA: JNK ) , -$305 million) saw the most money leave among ETFs, while Lipper’s Loan Participation Funds (-$567million) and High Yield Funds (-$254 million) classifications had the largest negative flows on the mutual fund side. Municipal bond mutual funds had net inflows of just over $11 million for the week. Funds in the national muni debt classifications (+$28 million) were the beneficiaries of the largest positive flows. Share this article with a colleague Scalper1 News

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