by Pat Keon, CFA.
Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) experienced net inflows for the third consecutive week, taking in approximately $6.9 billion of net new money for the fund-flows week ended Wednesday, June 1. During this three-week run funds grew their coffers by $24.7 billion. This past week’s net inflows were paced by money market funds (+$7.7 billion), while municipal bond funds contributed $473 million to the total inflows. Equity funds (-$776 million) and taxable bond funds (-$497 million) both suffered net outflows for the week.
The S&P 500 Index appreciated 0.4% for the fund-flows week, marking its second straight weekly increase. There was mixed economic news during the week that helped explain the somewhat muted result for the market. On the positive side the rally in oil prices continued. Oil breached the $50/barrel mark for the first time in seven months, and there was also some encouraging economic data released. The gross domestic product, which measures U.S. economic growth, was revised upward to 0.8% from the 0.5% for Q1 2016. On the negative side of the ledger Federal Reserve Chair Janet Yellen commented that the Fed remains open to a possible interest rate increase this summer.
The outflows from equity funds were driven by mutual funds (-$4.7 billion), while equity ETFs actually took in $3.9 billion of net new money. The outflows for mutual funds were dominated by domestic equity funds (-$4.2 billion), but nondomestic equity funds also contributed $483 million of negative flows. The largest inflows on the ETF side came from iShares Russell 2000 (IWM, +$464 million) and SPDR S&P 500 (SPY, +$442 million).
Taxable bond ETFs (-$376 million) accounted for most of the net outflows for the group, while taxable bond mutual funds saw $120 million leave their coffers. The five largest net outflows for ETFs came from iShares Treasury products, for a combined total of $1.1 billion. Funds in Lipper’s Core Bond Funds category had the largest net outflows (-$327 million) among the bond mutual funds.
Municipal bond mutual funds extended their string of net inflows to 35 weeks—taking in $380 million of net new money this past week. Funds in the High Yield Muni Debt Funds (+$132 million) and Short/Intermediate Muni Debt Funds (+$87 million) classifications were the largest contributors to the week’s inflow totals.
This past week’s flows activity (+$7.7 billion net) marked the sixth consecutive week of positive flows for money market funds, during which time they took in $42.5 billion of net new money. Funds in Lipper’s Institutional U.S. Government Money Markets Funds classification were responsible for all the net inflows for the group this past week (+$17.9 billion).