For the fund flows week ended August 27, 2014, the equity market posted solid gains and continued to grind higher. The S&P 500 rose 0.72% for the week, putting its year-to-date gain at 9.68%. The week began with upbeat economic reports on manufacturing, employment, and housing sales. However, geopolitical tensions in Ukraine tempered the market’s tone on Friday, August 22, despite relatively dovish comments by Federal Reserve Chair Yellen. However, the market rallied on Monday and Tuesday, in very light trading, amid anticipation of an uptick in M&A activity and on increased consumer confidence levels. As a result, the S&P 500 closed above the 2,000 mark on Tuesday for the first time. On Wednesday, stocks finished largely flat on minimal new economic news.
Watch the corresponding video to this report here.
With all this as a backdrop, investors were net buyers (+$6.1 billion) of equity fund assets (including conventional funds and exchange-traded funds [ETFs]) for the week. Taxable bond funds (including ETFs) saw net inflows of $3.0 billion, while money market funds witnessed net inflows of $13.3 billion. The municipal bond funds macro-group (including ETFs) witnessed net inflows of $446 million (for a sixth consecutive week of net inflows), but the flows were down from the previous week’s $648 million.
Equity funds (ex-ETFs) had net inflows (+$415 million), following the previous week’s inflows of $1.3 billion. Equity ETFs witnessed positive net flows of $5.7 billion. Nondomestic equity mutual funds (excluding ETFs) had positive net flows (+$864 million), while nondomestic equity ETFs also had net inflows (+$2.1 billion) for the second week in a row. Domestic equity funds (ex-ETFs) had negative flows (-$449 million), following the previous week’s positive flows (+$380 million), while domestic equity ETFs saw net inflows (+$3.6 billion) for a third consecutive week.
Lipper’s Large-Cap Growth Funds classification (excluding ETFs) had net outflows (-$497 million), following the previous week’s positive net flows of $220 million. Prior to that week, the classification had witnessed 16 consecutive weeks of net outflows. Small-Cap Growth Funds continued to see net outflows (-$256 million) for a twenty-third week in a row.
SPDR S&P 500 ETF (SPY) had relatively small net positive flows of $410 million. IShares MSCI Emerging Markets (EEM) also had net inflows (+$145 million), while IShares MSCI EAFE (EFA) had modest net outflows of $4 million.
Taxable bond funds (including ETFs) had $3.0 billion of net inflows. The Barclay’s U.S. Aggregate Bond Index rose 0.38% for the week and has climbed 4.67% so far for 2014. The bond market experienced gains as investors believed the timing of future Fed rate increases will not be moved forward despite the release of positive economic data. Uncertainty surrounding Ukraine and falling European sovereign yields also contributed to bond price increases. The benchmark ten-year Treasury yield began the week at 2.43% and ended at 2.37%.
Taxable bond fund investors were net buyers of fixed income assets as some investors favored this safe-haven asset class. But loan participation funds including ETFs (-$298 million) witnessed their seventh consecutive week of net outflows. High-yield funds saw net inflows ($672 million) for the third consecutive week as investors appeared enticed by the relatively attractive yields in the corporate bond non-investment-grade segment and on recent stability in this asset class. Core bond funds had positive net flows, with $79 million entering the segment for the week.
For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or this video.
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