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April 1, 2016

U.S. Fund Flows: Funds Take in $8.8 Billion of Net New Money for the Week

by Pat Keon, CFA.

Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) experienced positive flows of almost $8.8 billion for the fund-flows week ended Wednesday, March 30. The aggregate net inflows were propped up by money market funds, which had inflows of $12.1 billion for the week. Municipal bond funds (+$784 million) also contributed to the overall net inflows, while equity funds (-$2.6 billion) and taxable bond funds (-$1.5 billion) saw money leave their coffers.

It was another good week for the broad-based equity indices; the S&P 500 Index (+1.3%) and the Dow Jones Industrial Average (+1.2%) each posted their seventh consecutive week of gains. During this period each index appreciated over 11% and pushed its respective year-to-date performance into the black (Dow +1.7%; S&P 500 +1.0%).

The week’s performance was the result of the Federal Reserve’s jawboning the market. Both indices captured the lion’s share of their gains during the last two trading days of the week after Fed Chair Janet Yellen gave a dovish speech indicating the Fed would proceed cautiously in the future in relation to raising interest rates. Yellen explained that this would be the course moving forward because U.S. inflation is not yet robust enough to protect the economy from risks around the globe, including the economic situation in China, oil prices, and weak global growth.

ETFs (-$909 million this past week) were responsible for the majority of the net outflows for taxable bond funds, while mutual funds contributed $596 million of negative flows. On the ETF side of the ledger the largest net outflows belonged to funds in Lipper’s High Yield Funds classification (-$596 million), while for mutual funds the Loan Participation Funds classification (-$171 million) had the worst outflows.

Mutual funds (-$4.0 billion) accounted for all the net outflows for equity funds, while ETFs had net inflows of $1.4 billion. For mutual funds both domestic equity funds (-$2.9 billion) and nondomestic equity funds (-$1.1 billion) suffered net outflows, while within the ETF universe both groups took in net new money for the week (domestic equity +$762 million, nondomestic equity +$657 million).

Municipal bond mutual funds’ string of positive flows (+$698 million for this past week) reached the half-year mark. Funds in the High Yield Muni Debt Funds (+$242 million) and Intermediate Muni Debt Funds (+$145 million) categories contributed the most to the week’s net inflows.

The net inflows into money market funds (+$12.1 billion) broke a two-week outflow streak during which almost $55 billion left the group. Breaking down the flows by fund classification shows that Institutional U.S. Treasury Money Market Funds (+$9.9 billion) and Institutional U.S. Government Money Market Funds (+$6.8 billion) had significant net inflows, while the largest outflows belonged to Institutional Money Market Funds (-$2.4 billion).

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