U.S. Fund-Flows Weekly Report: Equity Funds Drive Net Outflows

Lipper’s fund asset groups (including both mutual funds and ETFs) suffered negative net flows of $6.7 billion for the fund-flows week ended Wednesday, March 21. Equity funds (-$9.6 billion) accounted for the lion’s share of the net outflows, while money market funds (-$305 million) also saw money leave their coffers. The taxable bond funds (+$2.8 billion) and municipal debt funds (+$445,000) macro-groups both took in net new money for the week.

The S&P 500 Index and the Dow Jones Industrial Average were both down for the fund-flows trading week; the S&P retreated 1.37%, while the Dow was off 0.31%. These results reduced the S&P’s year-to-date gain to 1.43%, while the Dow saw its year-to-date performance fall into the red (-0.15%). Both indices suffered all of their losses for the week on one trading day (March 19), thanks to controversy over Facebook. It came to light at the start of the week that Cambridge Analytica, a political data firm, gained access to the private information of approximately 50 million Facebook users without their permission. Shares of Facebook plummeted 6.8% (the second largest one-day percentage loss ever for the stock) on the news, resulting in a loss of over $36 billion in market value. The contagion from Facebook spread to the entire technology sector, which in turn weighed down the general markets, resulting in one-day losses of 1.42% and 1.35%, respectively, for the S&P 500 and the Dow. In other market news the Federal Reserve announced it would be raising interest rates by 25 basis points. The Fed also alerted investors that they should expect another two to three rate hikes this year, followed by three more in 2019. The Fed’s forecast was based on its internal projections for faster economic growth, higher inflation, and lower unemployment for the near future.

ETFs

ETFs suffered net outflows of $11.2 billion for the week, almost all of which were attributable to equity ETFs (-$11.1 billion). The net outflows were heavily concentrated; four products accounted for the overwhelming majority of the losses: iShares Core S&P 500 (IVV, -$6.6 billion), SPDR S&P 500 ETF (SPY, -$4.4 billion), SPDR Dow Jones Industrial Average (DIA, -$1.7 billion), and PowerShares QQQ Trust (QQQ, -$1.5 billion). For the other asset groups muni bond ETFs recorded net inflows of $40 million and taxable bond ETFs saw $141 million net leave.

Equity Mutual Funds

Equity mutual funds had net-positive flows of $1.5 billion for the week. Nondomestic equity funds (+$2.8 billion) were responsible for all the net inflows, while domestic equity funds (-$1.4 billion) suffered net-negative flows. The largest net inflows among nondomestic equity funds belonged to Lipper’s Global Equity Income Funds peer group (+$792 million), and the largest net-negative flows for domestic equity funds were attributable to Equity Income Funds (-$514 million).

Fixed Income Mutual Funds

Taxable bond mutual funds (+$2.9 billion) and municipal bond mutual funds (+$405 million) both had positive net flows for the week. The largest net inflows for taxable bond funds belonged to Core Bond Funds (+$1.1 billion) and Core Plus Bond Funds (+$651 million). The Intermediate Muni Debt Funds (+$332 million) and General Muni Debt Funds (+$134 million) peer groups paced the muni debt funds group.

Money Market Mutual Funds

Overall, money market mutual funds had net outflows of $305 million for the week. Institutional U.S. Government Money Market Funds (-$2.5 billion) suffered the largest net outflows, while the Institutional Money Market Funds peer group had the largest net inflows (+$1.5 billion).