Lipper U.S. Weekly FundFlows Insight Report: Overall Net Outflows Are Driven by Investors Fleeing Fixed Income Funds

Lipper’s fund asset groups (including both mutual funds and ETFs) saw $6.2 billion net leave their coffers for the fund-flows week ended Wednesday, October 31. The net outflows were attributable to taxable fixed income funds (-$7.5 billion) and municipal bond funds (-$1.3 billion). The equity funds (+$2.4 billion) and money market funds (+$176 million) asset groups both took in net new money.

Market Overview

The Dow Jones Industrial Average (+2.17%) and the S&P 500 Index (+2.09%) had bounce-back performances for the fund-flows week ended Wednesday, October 31, but that was not enough to salvage their overall performance for the month of October. The S&P 500 was down 6.94% for the month, its worst monthly performance since September 2011 when it retreated 7.18%. Meanwhile, the Dow lost 5.07% this October. The October losses reduced the Dow’s year-to-date gain to 1.60% and the S&P 500’s to 1.43%. There were several reasons for October’s nosedive for stocks: (1) a slowdown in growth of technology sector stocks, which has been driving the markets all year; (2) continued trade tensions between the U.S. and China; and (3) the possibility of the Federal Reserve escalating its interest rate-hike program because of an overheating U.S. economy. The markets rebounded this past week on the strength of some positive earnings reports (General Electric, Microsoft, Facebook) as well as on investors’ buying tech stocks on the dip.

ETFs

ETFs took in net new money (+$11.2 billion) for the second consecutive week. All three ETF asset groups experienced net inflows, but equity ETFs (+$10.3 billion) were responsible for the lion’s share of the net inflows. The largest individual net inflows for equity ETFs belonged to SPDR S&P 500 ETF (SPY, +$2.9 billion) and iShares Core S&P 500 ETF (IVV, +$2.9 billion). Taxable bond ETFs and municipal bond ETFs contributed $792 million and $106 million, respectively, to the total net inflows for the ETF group.

Equity Mutual Funds

Equity mutual funds experienced net-negative flows (-$7.9 billion) for a nineteenth consecutive week. Both domestic equity funds (-$4.7 billion) and nondomestic equity funds (-$3.2 million) saw money leave their coffers. It was the twenty-fourth straight week of net outflows for domestic equity funds and the sixth for nondomestic equity funds.

Fixed Income Mutual Funds

Both the taxable bond (-$8.3 billion) and muni debt (-$1.4 billion) mutual fund groups suffered net outflows this past week. It was the sixth straight weekly net outflows for both the muni group and the taxable bond group. Twenty-three of Lipper’s twenty-eight taxable fixed income peer groups had net outflows, paced by High Yield Funds (-$1.2 billion) and Loan Participation Funds (-$956 million). The biggest net outflows among muni debt funds belonged to the High Yield Muni Debt Funds (-$450 million) and Intermediate Muni Debt Funds (-$445 million) peer groups.

Money Market Mutual Funds

Overall net flows were extremely muted for money market funds at just a positive $176 million this past week. But taking a more granular look at the peer groups reveals there was a lot of activity going on within the asset group. The largest net inflows belonged to Money Market Instrument Funds (+$40.2 billion) and Institutional Money Market Funds (+$39.0 billion), while the largest net outflows were for Institutional U.S. Government Money Market Funds (-$51.3 billion) and Institutional U.S. Treasury Money Market Funds (-$14.5 billion).