Lipper Fund Flows: Gains For All Groups

Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) experienced aggregate net inflows for the fourth consecutive week—taking in over $56 billion of net new money during that time. The groups had positive flows of $24.8 billion for the fund-flows week ended Wednesday, October 28, paced by money market funds, which had net inflows of $15.7 billion. The other macro-groups all posted gains for the week as well; equity funds took in $8.4 billion of net new money, while taxable bond funds (+$432 million) and municipal bond funds (+$349 million) recorded more modest increases.

The Dow Jones Industrial Average (+3.6%) and the S&P 500 Index (+3.5%) both posted strong performance numbers for the week. The indices were bolstered by improving economic data on the home front, stronger-than-expected corporate earnings reports from the technology sector, measures to ease global growth concerns, and the Federal Reserve’s leaving the window open to a possible interest rate hike before year-end.

The week got off to a roaring start as both indices pocketed roughly 2.8% in combined gains during the first two trading days. Strong U.S. economic data and talk of more quantitative easing in Europe were the triggers on Day One. U.S. existing-home sales posted strong numbers for September (+4.7%), while new applications for unemployment benefits were at near-40-year lows.

Across the pond, European Central Bank President Mario Draghi stated that the central bank may extend stimulus measures if global growth continues to be a concern. The rally continued on Day Two as tech companies Alphabet Inc., Microsoft Corp., and Amazon.com all posted stronger-than-expected earnings, while China announced a surprise interest rate cut (its sixth in less than a year) in an attempt to revive its slumping economy. The market experienced another bump on the last trading day of the week when the Fed hinted that the long-awaited interest rate increase may finally arrive in December. The Fed indicated that the global landscape will become less of a concern in December’s discussion, and the determining factors will be the next two monthly jobs reports (the Fed is looking for some additional improvement) and the inflation rate (for which the Fed has set a 2% target).

The week’s net inflows for money market funds (+$15.7 billion) represented the fifth week in six of positive flows, which brought over $55 billion of net new money into the group. Institutional money market funds (+$11.6 billion) and institutional U.S. government money market funds (+$8.6 billion) were the two largest contributors to the week’s gains.

Equity ETFs were responsible for the lion’s share of the net inflows (+$8.2 billion) for the equity group, while equity mutual funds contributed $221 million to the total. SPDR S&P 500 ETF Trust (SPY, +$2.5 billion) and Health Care Select Sector SPDR Fund (XLV, +$769 million) had the two largest individual increases on the ETF side. For mutual funds—contradicting the trend we’ve seen all year—nondomestic equity funds had net outflows for the week (-$339 million), while domestic equity funds had positive net flows (+$560 million).

Mutual funds were responsible for all the net inflows for taxable bond funds (+$660 million), while ETF products saw $228 million leave their coffers. Lipper’s High Yield Funds and Core Plus Bond Funds classifications (+$787 million and +$570 million, respectively) recorded the two largest net inflows on the mutual fund side. For ETFs, two Treasury products had the largest individual net outflows: iShares 7-10 Year Treasury Bond ETF (IEF, -$602 million) and iShares 3-7 Year Treasury Bond ETF (IEI, -$410 million).

Municipal bond mutual funds took in $148 million of net new money—for their fourth consecutive week of positive flows. Funds in Lipper’s High Yield Municipal Bond Funds classification (+$181 million) accounted for all of the week’s net inflows.