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July 18, 2016

U.S. Fund-Flows Report: Fund Macro-Groups Enjoy Largest Net Inflows of the Year

by Patrick Keon.

Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) took in $33.5 billion of net new money for the fund-flows week ended Wednesday, July 13. That was the largest positive flow of the year for the fund macro-groups, coming in at over twice the $16.6 billion of net inflows for the fund-flows week ended January 27, 2016. All the fund macro-groups contributed to this past week’s yearly best for inflows. Equity funds broke a ten-week streak of net outflows, taking in $7.8 billion net. Municipal bond funds recorded their forty-first straight week of inflows, growing their coffers by $1.2 billion. Taxable bond funds were on the plus side for the second straight week with net inflows of $8.7 billion, and money market funds contributed $15.8 billion to the total.

The broad-based equity markets continued their rebound from the “Brexit” hiccup of a few weeks ago. The S&P 500 Index appreciated 2.5% for the fund-flows trading week, with a surprisingly strong U.S. employment report spurring the week’s gains. The 287,000 jobs added in June were the largest increase since last fall and gave the street confidence that the U.S. economy is rebounding from its lackluster first quarter performance. The rally continued throughout the week; the S&P 500 Index closed at record highs in each of the last three trading days of the week.

All the net inflows for equity funds went into ETFs (+$15.3 billion), while mutual funds continued their losing ways with their eighteenth consecutive week of net outflows (-$7.5 billion). Nondomestic equity mutual funds, with net outflows of $1.5 billion, continued to feel the impact of the Brexit vote. It was the third consecutive weekly net outflows since the vote, during which time nondomestic equity mutual funds saw their coffers shrink $5.5 billion and reduce their year-to-date positive flows to $2.5 billion. Relatively speaking, nondomestic equity ETFs did not fare well either; while the group did manage to take in over $750 million of net new money, that paled in comparison to the windfall for domestic equity ETFs (+$14.5 billion).

ETFs (+$6.1 billion) accounted for the lion’s share of the net inflows for taxable bond funds, while mutual funds contributed $2.6 billion. It was risk on; funds in Lipper’s High Yield Funds category had the largest net inflows for both ETFs (+$2.6 billion) and mutual funds (+$1.8 billion).

Municipal bond mutual funds extended their positive-flows streak to 41 weeks, taking in $1.1 billion of net new money this past week. Investors turned to riskier assets there as well; funds in the High Yield Muni Debt Funds category (+$317 million) had the largest net inflows for the week.

Money market funds had net inflows of $15.8 billion for the week, which reduced their year-to-date net outflows to $63.4 billion. Funds in the institutional money market fund categories (+$17.3 billion) contributed the most to the overall net inflows, with funds in Lipper’s Institutional Money Market Funds category accounting for $12.4 billion.


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