by Pat Keon, CFA.
Lipper’s fund asset groups (including both mutual funds and ETFs) had net positive flows of $24.6 billion for the fund-flows trading week ended Wednesday, March 27. Money market funds drove the overall net inflows as they took in $31.6 billion in net new money. Taxable bond funds (+$2.5 billion) and municipal debt funds (+$1.5 billion) also contributed to the net positive flows, while equity funds suffered net outflows of $11.0 billion.
The major equity indices were all down for the fund-flows trading week. The NASDAQ Composite was the hardest hit (-1.11%), while the S&P 500 Index and Dow Jones Industrial Average were off 0.67% and 0.47%, respectively. Despite these losses, all of the indices are poised to post impressive results as the first quarter comes to a close—the NASDAQ (+15.19%) and the S&P 500 (+11.91%) have double-digit increases virtually locked up, while the Dow (+9.85%) is on the verge of double-digit gains. The markets suffered the majority of their losses on Friday, March 22, as weak factory data both in the U.S. and overseas led to global growth concerns and an inversion of the yield curve. The three-month/10-year yield inverted that day, with the three-month Treasury bill yielding 2.46% and the 10-year Treasury note at 2.44%. This is the first time this inversion has occurred since 2007, and it is a concern because past inversions have preceded recessions. The inverted yield curve has held through the end of the fund-flows week, continuing to drive recession fears.
The ETF universe suffered net outflows of $4.6 billion for the week. Equity ETFs (-$6.3 billion) were responsible for all of the net outflows, while taxable bond ETFs (+$1.4 billion) and muni debt ETFs (+$291 million) were in net positive territory. On the equity ETF side of the ledger, the net outflows were dominated by SPDR S&P 500 ETF (SPY, -$3.0 billion) and Invesco QQQ Trust (QQQ, -$1.4 billion), while iShares Core MSCI EAFE (IEFA, +$1.0 billion) had the largest net inflows. For fixed income ETFs, iShares iBoxx $Investment Grade Corporate Bond ETF (LQD, +$858 million) had the largest net positive flow for taxable bonds, while iShares National Municipal Bond ETF (MUB, +$178 million) led the muni debt group.
Equity Mutual Funds
Equity mutual funds (-$4.7 billion) suffered their sixth consecutive weekly net outflow. This week’s net negative flows were driven by domestic equity funds (-$4.2 billion), while nondomestic equity funds contributed -$518 million to the total net outflows. There were net outflows almost across the board for U.S. equity funds, with the Equity Income Funds (-$444 million) experiencing the largest outflows, while International Multi-Cap Growth Funds (-$411 million) suffered the largest exodus among the nondomestic equity funds peer groups.
Fixed Income Mutual Funds
Fixed income funds continued their respective hot streaks as muni debt funds (+$1.2 billion) increased their consecutive weekly net inflows streak to 12, while taxable bond funds (+$1.1 billion) raised their run to 11 straight weeks. Taxable bonds are up $47.1 billion for the year, while muni debt funds have grown their coffers by $22.3 billion. For the week, Core Plus Bond Funds (+$1.2 billion) and High Yield Muni Debt Funds (+$476 million) had the highest net inflows for their respective fixed income asset groups.
Money Market Mutual Funds
Money market funds (+$31.6 billion) took in net new money for the first week in three and had the largest net inflows among the asset groups. The Institutional U.S. Treasury Money Market Funds (+$19.8 billion) and Institutional U.S. Government Money Market Funds (+$13.8 billion) peer groups were responsible for the lion’s share of the week’s net inflows.