May 19, 2017

U.S. Fund-Flows Weekly Report: Funds Take in $7.6 Billion of Net New Money

by Patrick Keon.

Thomson Reuters Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) had net inflows of $7.6 billion for the fund-flows week ended Wednesday, May 17. Taxable bond funds (+$4.4 billion) and money market funds (+$4.1 billion) accounted for the lion’s share of the positive flows, while municipal bond funds contributed $427 million of net new money. Equity funds (-$1.2 billion) were the only fund macro-group that suffered net outflows for the week.

A flat week of market activity was blown out of the water on the last trading day as the equity markets tanked on news that President Donald Trump allegedly tried to interfere with the FBI’s investigation of Michael Flynn, his former national security advisor. The markets were in turmoil because the investigation sure to follow this news story would be yet another obstacle preventing President Trump from implementing his pro-business agenda (tax reform, deregulation). The S&P 500 Index and the Dow Jones Industrial Average lost 1.82% and 1.78%, respectively, in trading that day, accounting for all of both indices’ losses for the week.

Mutual funds overall had net inflows of $3.8 billion for the week. Every fund macro-group except equity funds (-$1.8 billion) contributed to the positive net flows. The main contributors to the inflows were money market funds (+4.1 billion), while taxable bond funds (+$1.2 billion) and municipal bond funds (+$329 million) both took in net new money. Funds in Lipper’s Institutional U.S. Treasury Money Market Funds classification (+$4.5 billion) were responsible for the increase seen in the money market funds group. For taxable bond funds the largest net inflows belonged to Core Plus Bond Funds (+$525 million) and Short Investment-Grade Debt Funds (+$391 million), while for municipal bond funds it was the riskier assets that took in new money; High Yield Muni Debt Funds had net inflows of $208 million. As the table below indicates, it was once again domestic equity funds (-$1.82 billion) that did the bulk of the damage to the equity fund macro-group.

ETFs experienced their fourth consecutive week of net inflows as all the macro-groups had positive flows. Taxable bond ETFs took in the most net new money (+$3.1 billion), with iShares iBoxx $IG Corporate Bond ETF (LQD, +$733 million) taking in the most money for individual taxable bond ETFs. Equity ETFs (+$599 million) had their sixth consecutive weekly net inflows, led by iShares MSCI EAFE ETF (EFA, +$1.5 billion), while muni bond ETFs experienced a small positive net flow of $98 million.

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