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November 21, 2014

Both equity mutual fund (+$122 million) and equity ETF (+$449 million) investors are net buyers for the week as market volatility declines

by Lipper Alpha Insight.

For the fund-flows week ended November 20, 2014, the equity markets posted gains, with the S&P 500 climbing 0.57%. The market climb during the period was aided by strong results from Wal-Mart and data consistent with an improving labor market as well as broad expectations that the Federal Reserve will continue to keep interest rates near zero well into 2015. The markets were also bolstered by rising expectations surrounding the implementation of additional stimulus measures by central banks in Japan and Europe. U.S. stocks fell modestly at the close of the period on Wednesday as the release of the most recent Federal Reserve meeting notes provided little additional insight on when interest rates may rise. The NASDAQ composite climbed 0.58% for the flows week, putting its 2014 return so far at 12.59%. Small-cap stocks lagged larger-cap stocks once again, with the Russell 2000 returning minus 2.40% for the week. The year-to-date return for the Russell 2000 (+0.59%) still significantly trailed the return of large-caps, following several recent weeks of underperformance.

Investors were net buyers (+$571 million) for the week of equity fund assets (including conventional funds and exchange-traded funds [ETFs]). Taxable bond funds (including ETFs) saw net inflows for a ninth consecutive week (+$1.5 billion), while money market funds witnessed net inflows of $7.8 billion. The municipal bond funds macro-group (including ETFs) witnessed net inflows of $590 million.

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Equity funds (ex-ETFs) had net inflows (+$122 million), following the previous week’s net outflows of $1.9 billion. Meanwhile, equity ETFs witnessed net inflows of $449 million, following three weeks of strong net inflows totaling $37.3 billion.

Nondomestic equity mutual funds (excluding ETFs) had net outflows (-$48 million) for the week, while nondomestic equity ETFs had net inflows (+$1.1 billion) for a fourth week in a row. Domestic equity funds (ex-ETFs) had net inflows (+$170 million) for the first time in three weeks. Meanwhile, domestic equity ETFs saw net outflows of $689 million for this past week—the first outflows since those of the week ended October 22, 2014. ETF activity was more muted during the past week as market volatility subsided.

The Lipper Emerging Markets Funds classification (ex-ETFs) witnessed net inflows (+$142 million) for the fourth consecutive week as some investors returned to the segment following a decline in crude oil prices. (This decline stands to benefit those emerging countries dependent on energy imports.)

 SPDR S&P 500 ETF (SPY) individually had net outflows (-$3.1 billion) following three consecutive weeks of strong net inflows. Similarly, iShares Russell 2000 ETF (IWM) witnessed a net outflow of $893 million during this past week after two consecutive weeks of robust net inflows.

The Barclay’s U.S. Aggregate Bond Index witnessed a slight decline (-0.01%) for the week but still remained well into positive total return territory so far for 2014, up 5.02%. The bond market experienced modest losses during the week after initially being aided by falling crude oil prices, which lowered inflation expectations, along with a limited supply of new corporate debt issuance. These positive catalysts for bond prices were overshadowed at the end of the period by a lack of consensus from the Federal Reserve on when interest rate policy might be altered, resulting in a heightened focus on current economic data points. The benchmark ten-year Treasury yield began the week at 2.37% and ended at 2.36%.

Core-plus bond funds (excluding ETFs) again had strong net inflows (+$1.5 billion) for the week. High-yield funds saw more modest net inflows (+$68 million) following four consecutive weeks of strong net inflows, while loan participation funds had net outflows (-$343 million) for a nineteenth week in a row.

For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or watch the following video:

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