July 9, 2020

Lipper U.S. Weekly FundFlows Insight Report: Funds Take in Net New Money Paced by Taxable Bond Funds

by Pat Keon, CFA.

Lipper’s fund asset groups (including both mutual funds and ETFs) took in $16.9 billion of net new money for the fund-flows trading week ended Wednesday, July 8. The taxable bond funds group (+$12.6 billion) paced the net inflows while money market funds (+$4.7 billion) and municipal bond funds (+$1.0 billion) also contributed to the overall net positive flows. Equity funds were the only group to suffer net outflows this week, as $1.5 billion left their coffers.

Market Overview

Equity indices finished up for the fund-flows trading week as the NASDAQ Composite Index, S&P 500 Index, and the Dow Jones Industrial Average gained 3.3%, 1.7%, and 1.3%, respectively.

Positives for the markets this week included the largest one-month jump (+11.7) for the Institute for Supply Management’s service sector index since it launched in 1997. The index closed June at 57.1—any result above 50.0 represents economic growth. The U.S. economy created jobs at a record rate in June. The 4.8 million new jobs created is the most since the government started tracking this data in 1939. This result could be expected as states started to reopen for business and furloughed employees came back to work. The markets also took strength from bullish news out of China as the country’s Shanghai Composite Index appreciated more than 5% to close at its highest level in two years.

ETFs

ETFs (+$10.6 billion) had net positive flows for the third straight week. All three of the asset classes in this universe contributed to the total net inflows as taxable bond, equity, and muni bond ETFs took in $6.6 billion, $3.6 billion, and $380 million of net new money, respectively. The net inflows for taxable bond ETFs were led by iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, +$1.3 billion) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, +$776 million), while Invesco QQQ Trust (QQQ, +$2.2 billion) and SPDR Gold (GLD, +$1.2 billion) paced the equity ETFs’ net intakes.

Equity Mutual Funds

Equity mutual funds saw net money leave (-$5.1 billion) for the eleventh consecutive week. Domestic equity funds (-$3.1 billion) were responsible for the majority of the net outflows while nondomestic equity funds also saw $1.9 billion leave. The largest net outflows among the peer groups belonged to Large-Cap Growth Funds (-$738 million) and International Large-Cap Growth Funds (-$863 million) for the domestic and nondomestic fund universes, respectively.

Fixed Income Mutual Funds

Taxable bond funds (+$6.0 billion) and muni bond funds (+$644 million) grew their respective consecutive net inflow streaks to 13 and nine weeks, respectively. The most significant net positive flows for taxable bond funds belonged to the Core Bond Funds ($1.4 billion) and Core Plus Bond Funds (+$920 million) peer groups. For the tax-exempt bond fund universe, General Muni Debt Funds (+$251 million) posted the highest result.

Money Market Mutual Funds

Money market funds (+$4.7 billion) recorded net inflows for the first week in eight. The largest net positive flows for the group belonged to Institutional Money Market Funds (+$6.5 billion) and Institutional U.S. Government Money Market Funds (+$6.5 billion), while Institutional U.S. Treasury Money Market Funds suffered net outflows of $4.9 billion.

 

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