April 18, 2019

U.S. Weekly FundFlows Insight Report: Large Seasonal-Related Outflows for Money Market Funds for the Fund-Flows Week

by Tom Roseen.

For the first week in four, investors were overall net redeemers
of fund assets (including those of conventional funds and ETFs), withdrawing $44.6
billion for Lipper’s fund-flows week ended April 17, 2019. However, the
headline numbers are misleading. Fund investors were net purchasers of equity
funds (+$5.5 billion), taxable fixed income funds (+$3.7 billion), and
municipal bond funds (+$679 million), while being net redeemers of money market
funds (-$54.5 billion)—the group’s largest net redemption since the week ended August
3, 2011.

Market Wrap-Up

Markets generally remained range-bound ahead of the start to
the Q1 earnings reporting season, which kicked off in earnest during the
fund-flows week with reports from JPMorgan Chase and Wells Fargo starting the deluge.
U.S. markets initially rallied on better-than-expected earnings reports from a
few bellwether stocks, but the NASDAQ got a shot in the arm—rising above the
8,000 mark for the first time since October 3, 2018—after Apple agreed to an
undisclosed settlement with Qualcomm. The Russell 2000 Price Only Index (-0.88%)
suffered the only downside-performance during the flows week of the broadly
followed U.S. indices. The Dow Jones Industrial Average Price Only Index (+1.12%)
posted the strongest returns of the broad-based U.S. indices for the flows week,
followed by the S&P 500 Price Only Index’s 0.42% and the NASDAQ Composite Price
Only Index’s 0.40% plus-side returns. News that European Union leaders agreed
to postpone Brexit until October 31 and that U.S./China trade negotiations were
still on track pushed international markets higher, with the Xetra DAX Total
Return Index (+2.54%) posting the strongest plus-side returns, followed by the
Nikkei 225 Price Only Index (+1.75%) and Shanghai Composite Price Only Index
(+1.11%).

On Thursday, April 11, investors struggled to find a
catalyst that would help propel markets higher. Minutes from the Federal Open
Market Committee’s March meeting showed that Federal Reserve officials dropped
plans for additional rate hikes in 2019 due to concerns over U.S. and global
economies. News that first-time jobless claims dropped to a 50-year low the
week prior was not enough to push markets higher on the day. However, on
Friday, April 12, the equity markets were pushed higher on strong bank earnings
and after Disney announced it would launch its own video-streaming business.
The markets also got a boost after Chinese trade data showed that March exports
rose by 12.2% from a year earlier.

On Monday, April 15, U.S equity markets suffered small
declines after Goldman Sachs and Citigroup showed declines in earnings compared
to Q1 2018, but still beat analysts’ lowered expectations for quarterly
profits. Nonetheless, the markets closed higher on Tuesday as the NASDAQ closed
above the 8,000 mark despite investors punishing health care insurers over
concerns that new health-care reform measures could weigh on industry profits.
Investors also shrugged off news that March industrial production fell 0.1% in
contrast to economists’ expectations for a 0.1% rise. The health care sector
continued its downward spiral on Wednesday, April 17, over concerns that future
policy changes might have an adverse effect on the sector. Asian stocks closed
generally higher on the day after data showed the Chinese economy grew at a
6.4% year-over-year clip in Q1 2019, beating analyst expectations.

Exchange-Traded Equity
Funds

For the third
week in a row, equity ETFs witnessed net inflows, taking in a little more
than $7.3 billion for the most recent fund-flows week. Authorized participants
(APs) were net purchasers of domestic equity ETFs (+$5.8 billion) for the third
consecutive week. Meanwhile, nondomestic equity ETFs also witnessed net inflows
for the third week in a row, taking in $1.5 billion this past week. SPDR S&P 500 ETF (SPY, +$5.1 billion)and Financial Select Sector
SPDR ETF
(XLF, +$865 million) attracted
the largest amounts of net new money of all individual equity ETFs.At the other end of the spectrum, Utilities Select Sector SPDR ETF (XLU, -$879 million) experienced the
largest individual net redemptions and iShares
Russell 2000 ETF
(IWM, -$803 million)suffered the second largest net redemptions
of the week.

Exchange-Traded Fixed
Income Funds

For the sixth week in a row, taxable fixed income ETFs witnessed net inflows, taking in $2.0 billion. APs were net purchasers of corporate investment-grade debt ETFs (+$916 million) and corporate high yield ETFs (+$724 million), while being net redeemers of international & global debt ETFs (-$315 million). iShares 7-10 Year Treasury Bond ETF (IEF, +$451 million) and iShares US Treasury Bond ETF (GOVT, +$350 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, -$463 million) and iShares JPM USD Emerging Markets Bond ETF (EMB, -$361 million) handed back the largest individual net redemptions for the week. For the second week in a row, municipal bond ETFs witnessed net inflows, taking in $86 million.

Conventional Equity
Funds

For the ninth week running, conventional fund (ex-ETF) investors
were net redeemers of equity funds, withdrawing $1.8 billion. Domestic equity
funds, handing back a little less than $1.3 billion, witnessed their tenth weekly
net outflows while posting a 0.02% loss on average for the fund-flows week. Their
nondomestic equity fund counterparts, posting a 0.52% gain on average, witnessed
their fourth consecutive weekly net outflows (-$552 million this past week). On
the domestic equity side, fund investors gave a cold shoulder to large-cap funds
(-$1.5 billion net) and small-cap funds (-$337 million), while investors on the
nondomestic equity side were net sellers of international equity funds (-$391 million)
and global equity funds (-$161 million).

Conventional Fixed
Income Funds

For the fourteenth consecutive week, taxable bond funds
(ex-ETFs) witnessed net inflows, taking in $1.6 billion this past week while
posting a 0.12% loss for the flows week. Fund investors were net purchasers of corporate
investment-grade debt funds (+$1.4 billion) and high yield funds (+$376 million),
while balanced funds (-$497 million) suffered the largest net redemptions of
the group. For the fifteenth straight week, municipal bond funds (ex-ETFs) witnessed
net inflows—taking in $593 million—while posting a 0.07% loss on average (their
first weekly market decline in 12).

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