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June 17, 2016

U.S. Fund-Flows Report: U.S. Funds Suffer Largest Weekly Net Outflows in Two Months

by Pat Keon, CFA.

Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) suffered net outflows of $19.1 billion for the fund-flows week ended Wednesday, June 15. This number marked the largest overall weekly net outflows since the week ended April 20, when U.S. funds saw over $32 billion leave. All the fund macro-groups except municipal bond funds (+$904 million) had money leave their coffers this past week. Money market funds (-$13.6 billion) had the largest net outflows, while equity funds (-$3.4 billion) and taxable bond funds (-$3.1 billion) also contributed significantly to the total negative flows. This week’s positive flows made it thirty-seven consecutive weeks of net inflows for municipal bond funds.

The S&P 500 Index depreciated 2.3% for the fund-flows week, breaking a three-week string of increases. The index posted losses every trading day of the week but incurred the lion’s share of its negative result (-1.7%) during the second and third trading days. The negative results were influenced by uncertainty over the upcoming “Brexit” vote as well as a slump in oil prices. The uneasiness of the market was evidenced by a flight to safety as the yield on the ten-year Treasury note fell to a three-year low (1.59%) on Wednesday, June 15. In other market news the Federal Reserve announced it would not raise interest rates in June, but that it is still targeting two rate increases for 2016; it expects the currently struggling U.S. economy to pick up steam in the second half of the year.

Once again the outflows from equity funds were driven by mutual funds (-$4.4 billion), while equity ETFs actually took in just over $1.0 billion of net new money. For mutual funds both domestic equity funds (-$3.0 billion) and nondomestic equity funds (-$1.4 billion) saw significant amounts of money leave. On the ETF side the largest inflows went into SPDR S&P 500 (SPY, +$1.3 billion) and SPDR Gold (GLD, +$809 million).

The outflows from taxable bond funds were fairly evenly split between mutual funds (-$1.8 billion) and ETFs (-$1.3 billion). The largest net outflows on the mutual funds side came from funds in Lipper’s High Yield Funds (-$226 million) and Short U.S. Government Funds (-$171 million) categories.  For ETFs iShares iBoxx $HY Corp (HYG, -$1.5 billion) and iShares iBoxx $IG Corp (LQD, -$444 million) were responsible for the two largest decreases.

Municipal bond mutual funds extended their positive-flows streak to 37 weeks as they took in $821 million of net new money this past week. Funds in the High Yield Muni Debt Funds (+$321 million) and General and Insured Muni Debt Funds (+$188 million) classifications contributed the most to the week’s net inflows.

Money market funds (-$13.6 billion) suffered their second consecutive week of net outflows. Funds in Lipper’s Institutional U.S. Money Markets Funds classification had the largest net outflows (-$14.4 billion) for the group, while U.S. Government Money Market Funds took in $4.3 billion of net new money.

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