August 17, 2019

Lipper U.S. Weekly FundFlows Insight Report: Despite Market Turmoil Funds Take in Net New Money

by Pat Keon, CFA.

Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) had net inflows of $21.1 billion for the fund-flows trading week ended Wednesday, August 14. All four fund asset groups had positive net flows for the week paced by money market funds which took in net new money of $10.6 billion. The remainder of the groups all had relatively strong net inflows as taxable bond funds, equity funds, and municipal bond funds grew their coffers by $5.8 billion, $3.1 billion, and $1.6 billion, respectively.

Market Overview

Markets tanked on the last trading day of the week driven downward by recession fears. Investors headed for the exit as the 2-year/10-year Treasury spread temporarily inverted in intraday trading. The inversion of this spread is considered a reliable predictor of a recession in the near future. The last time the spread inverted was June 2007, shortly before the global financial crisis. Longer-term maturities are impacted more by inflation and economic expectations, the 10-year Treasury yield has been driven lower in recent weeks by these factors as well as the escalation of the U.S.-China trade war and the protests in Hong Kong. The Dow Jones Industrial Average, NASDAQ Composite Index, and S&P 500 Index all retreated approximately 3.0% on August 14 (the day the yield curve inverted) and closed the fund-flows trading week down 2.0%, 1.1%, and 1.3%, respectively.

ETFs

ETFs had net inflows of $12.2 billion for the week as all three asset groups had positive net flows. Equity ETFs took in over $7.7 billion in net new money with the largest individual net inflows belonging to SPDR S&P 500 ETF (SPY, +$5.9 billion) and Invesco QQQ Trust (QQQ, +$2.9 billion). Taxable bond ETFs had positive net flows (+$4.3 billion) for the thirteenth week out of the fourteen with iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$839 million) and iShares 7-10 Year Treasury Bond ETF (IEF, +$555 million) contributing the largest positive flows. Municipal debt ETFs had net inflows of $123 million for their ninth consecutive week of positive net flows.

Equity Mutual Funds

Equity mutual funds (-$4.6 billion) had net outflows for the twenty-sixth straight week. Domestic equity funds (-$4.9 billion) were responsible for all of the net outflows while nondomestic equity funds took in $221 million in net new money. Diversified equity funds (-$3.1 billion) accounted for most of the net outflows among the domestic group while the Emerging Markets Funds peer group took in the most net new money (+$222 million) for the nondomestic side of the ledger.

Fixed Income Mutual Funds

Municipal debt funds (+$1.5 billion) extended their streak of consecutive net inflows to thirty-two, while taxable bond funds (+$1.5 billion) took in net new money for the eighth week in nine. As usual, the national muni debt fund peer groups (+$1.3 billion) paced the tax-exempt net inflows while the Core Plus Bonds Funds (+$1.5 billion) and Core Bond Funds (+$980 million) peer groups led the taxable bond fund side.

Money Market Mutual Funds

Money market funds had net-positive flows of $10.6 billion last week. The net inflows were driven by funds in the Institutional U.S. Government Money Market Funds (+$9.0 billion) and U.S. Government Money Market Funds (+$2.1 billion) peer groups. Money Market Instrument Funds (-$680 million) recorded the largest net outflow for the asset group.

 

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