Lipper U.S. Weekly FundFlows Insight Report: Investors Park Assets in Money Market Funds in Response to Market Volatility

Lipper’s fund asset groups (including both mutual funds and ETFs) took in $13.7 billion of net new money for the fund-flows week ended Wednesday, November 14. The net inflows were driven by money market funds (+$12.4 billion) and equity funds (+$2.7 billion), while taxable fixed income funds (-$1.2 billion) and municipal bond funds (-$131 million) both saw net money leave.

Market Overview

The Dow Jones Industrial Average (-4.20%) and the S&P 500 Index (-3.99%) both suffered substantial losses during the fund-flows trading week. This negative performance came on the heels of two consecutive strong weekly performances by each index that saw the Dow and the S&P 500 appreciate 6.50% and 5.94%, respectively. This past week’s downturn was driven by oil production news from the Middle East. Over the weekend Saudi Arabia announced that it would be cutting its oil production in December, and at the same time it intimated that OPEC could join in next year if additional production decreases were needed. This news pushed already declining oil prices down further. West Texas Intermediate Crude (WTI) had fallen for 12 consecutive sessions (prior to posting a gain on November 14) for a total loss of 17.6%, closing November 13 at $55.69/barrel. This was the WTI’s lowest closing price in a year; it closed November 16, 2017, at $55.14. The volatility in oil prices (as well as some weak economic data from China) contributed to the concerns about global growth that hung over the U.S. markets during the week. It was speculated that China might initiate additional economic stimulus measures after reports that Chinese property sales had declined and that credit had grown at its slowest annual pace ever.

ETFs

ETFs took in net new money (+$6.2 billion) for the fourth consecutive week. The positive net flows were mostly attributable to equity ETFs (+$6.4 billion), with muni bond ETFs contributing $93 million to the total net inflows. Taxable bond ETFs saw $279 million leave their coffers. The largest net inflows among individual equity ETFs belonged to two healthcare products: Health Care Select Sector SPDR (XLV, +$776 million) and First Trust Health Care AlphaDex (FXH, +$768 million). The largest net outflows among taxable bond ETFs belonged to iShares Short Treasury Bond ETF (SHV, -$507 million) and iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, -$412 million).

Equity Mutual Funds

Equity mutual funds suffered net outflows (-$3.7 billion) for a twenty-first consecutive week. Both domestic equity funds (-$3.0 billion) and nondomestic equity funds (-$700 million) saw net money leave their coffers. It was the twenty-sixth straight week of net outflows for domestic equity funds and the eighth for nondomestic equity funds.

Fixed Income Mutual Funds

Both the taxable bond (-$964 million) and muni debt (-$225 million) mutual fund groups suffered net outflows this past week. It was the eighth straight weekly net outflows for the muni group and the seventh straight for the taxable bond fund group. The largest net outflows among Lipper’s taxable bond fund peer groups belonged to Core Plus Bond Funds (-$463 million) and Core Bond Funds (-$367 million), while among the muni debt funds the High Yield Muni Debt Funds (-$168 million) and General Muni Debt Funds (-$130 million) peer groups had the largest net outflows.

Money Market Mutual Funds

Money market funds (+$12.4 billion) took in net new money for the fourth straight week, paced by the Institutional U.S. Treasury Money Market Funds (+$6.8 billion) and Institutional U.S. Government Money Market Funds (+$6.3 billion) peer groups.