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Lipper U.S. Weekly Fund Flows: A Tale Of 2 Cities

By Tom Roseen During the fund-flows week ended January 27, 2016, markets continued their wild swings upon hearing conflicting market and economic news throughout the week. On Thursday, January 21, U.S. stocks got a shot in the arm, fueled by a rally in oil prices, despite news that crude inventories had risen the prior week, that weekly initial jobless claims had risen to their highest level since July, and that the Philadelphia Federal Reserve Bank’s manufacturing index remained in negative territory for the fifth month in a row. Hints of more stimuli by the European Central Bank and news that China’s central bank had injected more cash into the country’s financial system helped markets gain some footing. On Friday all three major U.S. indices posted their first week of plus-side returns for 2016 after oil prices rose to their highest levels in nearly two weeks and after a report showed that North American oil rigs’ output had declined slightly. Market participants cheered news that preliminary readings of the purchasing managers’ index were on the rise and that December existing-home sales rose a whopping 14.7%. Unfortunately, another major rout in oil prices weighed heavily on the markets on the following Monday, sending the Dow Jones Industrial Average down by triple digits as investors began to look for clues on the Fed’s outlook after the FOMC meeting adjourned on Wednesday. Nonetheless, U.S. markets rose once again after witnessing another rebound in oil prices and after learning about strong earnings reports from bellwether firms Sprint (NYSE: S ), P&G (NYSE: PG ), and 3M (NYSE: MMM ). The U.S. market shrugged off another round of large declines in China’s Shanghai Composite and cheered news that November U.S. home prices rose at their fastest pace in 16 months and that January’s consumer confidence index beat expectations. Despite the Fed leaving rates unchanged after its January FOMC meeting, some investors worried that it had left the door open for a March interest rate increase, even though it acknowledged that economic growth had slowed. That led the U.S. markets to suffer yet another round of declines on Wednesday. A rise in oil and news that new home sales had rebounded in December weren’t enough to push the markets higher. While investors were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting a net $16.6 billion for the fund-flows week ended January 27, the headline numbers were a little misleading. As might be expected, given the recent volatility, investors turned their backs on equity funds, redeeming $1.2 billion net for the week, but they padded the coffers of money market funds (+$13.9 billion), taxable bond funds (+$3.3 billion), and municipal bond funds (+$0.6 billion). For the first week in four equity ETFs witnessed net inflows, taking in $3.9 billion. Despite concerns over the FOMC announcement, authorized participants (APs) were net purchasers of domestic equity ETFs (+$3.8 billion), injecting money into that group also for the first week in four. They also padded-for the first week in three-the coffers of nondomestic equity ETFs (but only to the tune of +$107 million). Perhaps as a result of the strengthening oil prices and better-than-expected earnings news from stalwart U.S. firms, APs turned their attention to some big-name ETFs, with the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) (+$3.5 billion), the iShares Russell 2000 ETF (NYSEARCA: IWM ) (+$2.7 billion), and the iShares MSCI Japan ETF (NYSEARCA: EWJ ) (+$0.7 billion) attracting the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum the iShares Russell 1000 Growth ETF (NYSEARCA: IWF ) (-$0.7 billion) experienced the largest net redemptions, while the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) (-$0.5 billion) suffered the second largest redemptions for the week. For the seventh week in a row APs padded the coffers of government/Treasury funds, injecting $3.7 billion for the week, their largest net inflows since February 4, 2015. Once again, in contrast to equity ETF investors, for the fourth week in a row conventional fund (ex-ETF) investors were net redeemers of equity funds, redeeming $5.1 billion from the group. Domestic equity funds, handing back $4.9 billion, witnessed their twelfth consecutive week of net outflows, despite posting a weekly return of 1.35%. Meanwhile, their nondomestic equity fund counterparts witnessed $0.2 billion of net outflows-suffering net redemptions for the first week in three. On the domestic side investors lightened up on large-cap funds and equity income funds, redeeming a net $2.3 billion and $1.0 billion, respectively, for the week. On the nondomestic side global equity funds witnessed $1.2 billion of net outflows, while international equity funds attracted some $1.0 billion. For the twelfth consecutive week taxable bond funds (ex-ETFs) witnessed net outflows, handing back a little over $2.6 billion for the week. Corporate investment-grade debt funds suffered the largest redemptions for the week, witnessing net outflows of $2.1 billion (for their tenth consecutive week of net redemptions), while corporate high-yield funds witnessed the second largest net redemptions (-$0.7 million). Despite the Fed’s leaving the door open for a March rate hike, bank rate funds-handing back some $0.7 billion for the week-experienced their twenty-seventh consecutive week of net outflows. In a flight to safety investors injected net new money into government mortgage funds (+$0.6 billion), government/Treasury and mortgage funds (+$0.4 billion), and government/Treasury funds (+$0.1 billion) for the week. For the seventeenth week in a row municipal bond funds (ex-ETFs) witnessed net inflows, taking in $502 million this past week.

Lipper Fund Flows: Another Miss For Money Markets With $20.2 Billion Exit

By Patrick Keon The S&P 500 Index (+0.41%) and the Dow Jones Industrial Average (+0.20%) both recorded gains for the flows week. The overall positive performance by the indices for the week marked a significant turnaround from the performance at the start of the week; both indices retreated over 2.5% during the first two trading days. Then the markets rallied over the second half of the week: the S&P 500 was up 3.0% and the Dow appreciated 2.8%. Again, news and speculation about whether the Federal Reserve will raise interest rates in December dominated the market news during the week. There was sufficient economic data and public signals from individual Fed presidents for the market to take the view that the rate rise in December is becoming a foregone conclusion. Economic data released the prior week showed continued strength in the jobs market, with new unemployment claims remaining low and inflation starting to percolate as U.S. consumer prices rose in October. Both of these areas had been previously pointed to by Fed Chair Janet Yellen as key determinants in the Fed’s decision-making process. Four Fed presidents (New York’s William Dudley, St. Louis’s James Bullard, Richmond’s Jeffrey Lacker, and Cleveland’s Loretta Mester) publicly expressed during the week that December is the right time to start lifting rates. The near certainty of a rate increase was taken as a positive by week’s end and was seen as a strong sign the U.S. economy is continuing to improve. This past week’s net outflows for money market funds (-$20.2 billion) pushed their overall outflows for the year so far to $23.2 billion. The week’s activity in the group was varied; funds in Lipper’s Money Market Funds and Institutional Money Market Funds classifications had significant net outflows of $14.6 billion and $13.8 billion, respectively. Meanwhile, Institutional U.S. Government Money Market Funds and Institutional U.S. Treasury Money Market Funds took in $4.5 billion and $3.0 billion of net new money. Equity mutual funds (-$3.3 billion) were responsible for all the net outflows from the equity fund macro-group, while equity ETFs had positive flows of just over $1 billion. Mutual funds saw net outflows from both domestic equity (-$2.6 billion) and nondomestic equity (-$700 million) funds. Among ETFs, the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) (+$693 million) and the United States Oil ETF (NYSEARCA: USO ) (+$373 million) experienced the two largest net inflows for the week. Similar to the equity funds, mutual funds were responsible for all the net outflows for taxable bond funds (-$820 million), while taxable bond ETFs saw their coffers grow $1.2 billion. Investors ran away from lower-quality mutual funds; Lipper’s High Yield Funds and Loan Participation Funds classifications had $1.0 billion and $234 million of net outflows for the week. The Core Bond Funds category paced the ETFs, with the group taking in over $930 million of net new money. Municipal bond mutual funds had net inflows of $263 million-for their seventh consecutive week of positive flows. Funds in Lipper’s national municipal bond fund classifications (+$251 million) accounted for the lion’s share of these positive flows.

Retail Investors Pull Back From Equity And Bond Funds

For the fund flows week ended November 11, the benchmark Dow Jones Industrial Average lost 165 points to settle at 17,702. Equity mutual fund investors made net redemptions of $1.7 billion for the week (of which $765 million was from large-cap funds), while equity exchange-traded funds saw net inflows of $643 million. A sour market in bonds (a decline of 0.64% for the week) may have led bond mutual fund investors to redeem shares. Overall, taxable bond mutual funds saw net outflows of $875 million for the week, which was the first outflow after four previous weeks of inflow activity. Money market funds saw net inflows of $6.5 billion, of which institutional investors added $11.3 billion and retail investors cashed out $4.8 billion. By Jeff Tjornehoj For the fund flows week ended November 11, the benchmark Dow Jones Industrial Average lost 165 points to settle at 17,702. Equity mutual fund investors made net redemptions of $1.7 billion for the week (of which $765 million was from large-cap funds), while equity exchange-traded funds (ETFs) saw net inflows of $643 million; investors backed out of the SPDR S&P 500 Trust ETF ( SPY , -$1.5 billion) and made modest contributions to the iShares Russell 2000 ETF ( IWM , +$1.6 billion) and the iShares MSCI EAFE ETF ( EFA , +$1.3 billion). A sour market in bonds (a decline of 0.64% for the week) may have led bond mutual fund investors to redeem shares. Overall, taxable bond mutual funds saw net outflows of $875 million for the week, which was the first outflow after four previous weeks of inflow activity. With no end in sight to the asset bleeding, Lipper’s Loan Participation Funds classification (-$213 million) marked 16 weeks of outflows by retail investors. Like their equity counterparts, high yield funds suffered outflows (-$543 million) among mutual fund investors, but unlike equities also saw net outflows on the ETF side (-$1.3 billion). Overall, bond ETFs saw $2.8 billion of net outflows. The week’s biggest bond ETF net outflows belonged to the SPDR Barclays Capital High Yield Bond ETF ( JNK , -$1.2 billion), while the iShares Core Total US Bond Market ETF ( AGG , +1.3 billion) led the net inflows list. Municipal bond mutual fund investors added $229 million net to their accounts, and those funds now have had inflows for six straight weeks – for their best showing since March. Money market funds saw net inflows of $6.5 billion, of which institutional investors added $11.3 billion and retail investors cashed out $4.8 billion. For more analysis please watch this video: