January 17, 2020

Lipper U.S. Weekly FundFlows Insight Report: Fixed Income Funds Drive the Week’s Overall Net Inflows

by Pat Keon, CFA.

Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) took in approximately $5.3 billion in net new money for the fund-flows trading week ended Wednesday, January 15. This overall net positive flow is the seventh in the last eight weeks (starting with the fund-flows week ended November 27, 2019) for funds during which they have grown their coffers by $110.3 billion. This week’s net inflows were led by the taxable bond funds group (+$12.2 billion), while municipal bond funds contributed $2.3 billion to the total. Conversely, money market funds and equity funds suffered net outflows of $8.2 billion and $1.1 billion, respectively.

Market Overview

The major equity indices continued their hot streak as they all recorded positive returns for the sixth consecutive fund-flows trading week. This week’s gains were led by the NASDAQ Composite Index (+1.42%), while the S&P 500 Index and the Dow Jones Industrial Average appreciated 1.11% and 0.99%, respectively. For the six-week time period (which began with the fund-flows week ending December 11), the NASDAQ (+8.08%) once again outdistanced the S&P 500 (+5.67%) and the Dow (4.99%).

The most significant market news this week was the announcement on the last trading day that the U.S. and China signed the first part of their trade agreement, which will hopefully bring to a halt the two-year trade war between the countries which has had a negative impact on global growth. The major goals of the pact are to further open Chinese markets to external companies and investors, protect the intellectual property of U.S. companies operating in China, and increase the sales of U.S. goods to China. The agreement did not remove the U.S. tariffs on $370 billion of Chinese goods, which represents approximately 75% of China’s total imports. Discussions about tariff reductions were tabled until future negotiations and were not expected to be completed until Q4 of this year, after the U.S. presidential election.

ETFs

ETFs took in $12.1 billion of net new money as all three fund asset groups experienced net inflows. Taxable bond ETFs (+$6.8 billion) and equity ETFs (+$4.8 billion) were responsible for the lion’s share of the net positive flows, with the largest individual net inflows belonging to SPDR S&P 500 ETF (SPY, +$1.9 billion) and iShares Core S&P 500 ETF (IVV, +$1.2 billion) for the equity group, and iShares Core U.S. Aggregate Bond ETF (AGG, +$962 million) for the taxable bond ETF side of the ledger. Muni bond ETFs had net inflows of $501 million for the week thanks to the $344 million increase for iShares National Muni Bond ETF (MUB).

Equity Mutual Funds

Equity mutual funds suffered their third consecutive net outflows as $5.9 billion left their coffers. Domestic equity funds (-$5.2 billion) were responsible for the majority of the week’s net outflows, while nondomestic equity funds had net outflows of $699 million. Among the peer groups, Large-Cap Growth Funds (-$1.2 billion) and International Large-Cap Growth Funds (-$582 million) had the largest net outflows in the domestic and nondomestic equity fund universes.

Fixed Income Mutual Funds

Municipal debt funds (+$1.8 billion) experienced net inflows for the fifty-fourth straight week, while taxable bond funds (+$5.4 billion) also took in net new money. The largest net inflows among the tax-exempt peer groups belonged to High Yield Muni Debt Funds (+$659 million) and General Muni Debt Funds (+$526 million), while Core Bond Funds (+$1.1 billion) and Core Plus Bond Funds (+$969 million) had the largest net inflows among the taxable bond fund peer groups.

Money Market Mutual Funds

Money market funds had net negative flows of $8.2 billion for the week. The Institutional U.S. Government Money Market Funds (-$4.5 billion) and Institutional U.S. Treasury Money Market Funds (-$3.8 billion) peer groups had the largest net outflows, while U.S. Government Money Market Funds (+$1.5 billion) had the largest net inflow.

 

 

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