Lipper Fund Flows: Fund Investors Duck For Cover During Rocky Week

U.S. stocks continued to stumble during the week as investors impatiently awaited Q1 earnings reports. Many pundits anticipated a poor earnings season and worried that the Federal Reserve is moving closer to rate hikes. Recent coordinated military strikes in Yemen supplied further fodder for concerns about crude oil prices, sending oil and gold prices up. Despite a larger-than-expected decline in first-time claims for weekly unemployment benefits, investors were concerned about what appears to be a drop in first quarter economic growth.

During the flows week ended Wednesday, April 1, 2015, U.S. market participants witnessed the largest weekly stock market decline since January, despite comforting words of a patient approach to future rate hikes by Fed Chair Janet Yellen. Geopolitical concerns and sluggish profit outlooks kept investors at bay. A flurry of M&A announcements and dovish comments by China’s central bank lifted markets for one day during the week. Despite encouraging news that consumer confidence came in better than anticipated on the last day of the month, the Dow Jones Industrial Average witnessed its sixteenth triple-digit move for March, giving it the claim to fame of having the second most of any month in history.

For the second week in three, fund investors were net redeemers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), withdrawing $39.5 billion for the week ended April 1, 2015. As a result of mixed economic news, investors ducked for cover, redeeming for the first week in eight some $11.2 billion from equity funds, $0.3 billion from municipal bond funds, and—redeeming for the second week in three—$30.4 billion from money market funds. However, for the third consecutive week they were net purchasers of taxable fixed income funds, injecting a net $2.5 billion.

For the first week in three, equity ETFs witnessed net outflows, handing back some $7.2 billion. As the result of increased volatility and weaker-than-expected economic reports, authorized participants (APs) were net redeemers of domestic equity funds (-$9.7 billion), pulling money out of the macro-group for the first week in three.

However, the dovish comments by the PBOC and the European Central Bank’s commitment to its quantitative-easing plans emboldened APs to be net purchasers of nondomestic equity funds, injecting a net $2.5 billion into the group. iShares Russell 2000 ETF (+$1.0 billion) attracted the largest net draw of all individual ETFs, despite recent news showing the nation’s economy grew slower than previously estimated. iShares U.S. Energy ETF (+$942 million) took in the next largest amounts of net new money for the week. At the bottom of the group, SPDR S&P 500 ETF suffered the largest net redemptions, handing back $10.5 billion for the week, bettered considerably by PowerShares QQQ Trust 1’s $1.4 billion of net redemptions.

For the second consecutive week, conventional fund investors were net redeemers of equity funds (ex-ETFs), withdrawing $4.0 billion from the group. Domestic equity funds, handing back $3.0 billion, witnessed their ninth straight week of net outflows while they had their second week in three of plus-side returns (+0.23% this past week). Meanwhile, their nondomestic equity fund counterparts witnessed $0.9 billion of net outflows—handing back money for the first week in eight. On the domestic side, investors lightened up on large-cap funds and equity income funds, redeeming a net $2.0 billion and $730 million, respectively, for the week. On the nondomestic side, international equity funds witnessed $0.9 billion of net outflows, while the emerging-market equity (+$384 million, taking in the lion’s share), Pacific ex-Japan, and Pacific Region fund groups attracted net new money collectively totaling a little under $0.5 billion.

For the thirteenth consecutive week, taxable bond funds (ex-ETFs) witnessed net inflows, taking in a little more than $1.8 billion. Flexible income funds attracted the largest sum of net new money, taking in a net $1.1 billion, while corporate investment-grade debt funds took in some $0.5 billion—for their thirteenth week of net inflows in a row. As a result of investors’ betting on the Fed being patient in raising interest rates, a subset of the corporate investment-grade debt funds group—bank loan funds—witnessed net outflows (-$414 million) for the third consecutive week. Municipal debt funds (ex-ETFs) witnessed their first week of net outflows in 13, despite posting their third straight week of plus-side performance (+0.12% this past 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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