by Pat Keon, CFA.
Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) had net negative flows of $12.1 billion for the fund-flows trading week ended Wednesday, January 29. This net outflow broke a streak of five consecutive weekly net inflows during which time funds grew their coffers by $82.4 billion. Money market funds (-$11.6 billion) and equity funds (-$6.6 billion) were responsible for this week’s net outflows while taxable bond funds (+$4.3 billion) and municipal bond funds (+$1.8 billion) both took in net new money.
The major equity indices finished down for the first fund-flows trading week in eight as the Dow Jones Industrial Average, S&P 500 Index, and the NASDAQ Composite Index retreated 1.55%, 1.46%, and 1.16%, respectively. Prior to this week, the indices had appreciated seven straight weeks (starting with the fund-flows week ended December 11, 2019) with the NASDAQ, S&P 500, and the Dow recording positive returns of 9.54%, 6.71%, and 5.56%, respectively, during this time period. The indices suffered the lion’s share of their losses this week during two trading days as global concerns over the coronavirus grew exponentially when it became apparent that China did not have the outbreak contained.
In market news, the week closed with the Federal Reserve announcing that it had left its benchmark federal-funds rate unchanged at its current policy meeting. The Fed also kept its policy outlook basically the same as it was from its previous meeting in December, meaning the Fed is content to keep rates static while it assesses the impact of last year’s three rate cuts.
ETFs had $2.7 billion leave their coffers, which represented the group’s first net outflows of 2020. The lion’s share of the net negative flows came from equity ETFs (-$2.4 billion), while taxable bond ETFs (-$379 million) also contributed to the total net outflows. Muni bond ETFs took in $83 million of net new money. The largest individual net outflows among equity ETFs belonged to SPDR S&P 500 ETF (SPY, -$1.3 billion) and iShares Russell 2000 ETF (IWM, -$836 million). On the taxable bond side of the ledger, the most significant net negative flows belonged to iShares iBoxx $ High Yield Corporate Bond ETF (HYG, -$1.9 billion) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, -$657 million).
Equity Mutual Funds
Equity mutual funds (-$4.2 billion) experienced net outflows for the fifth straight week. Domestic equity funds (-$4.4 billion) were accountable for all of the week’s net outflows, while nondomestic equity funds took in $247 million of net new money. Among the peer groups, Large-Cap Core Funds (-$1.4 billion) had the largest negative net flows on the domestic side, while Emerging Markets Funds had net inflows of $606 million to lead the nondomestic equity fund peer groups.
Fixed Income Mutual Funds
Municipal debt funds (+$1.7 billion) had net positive flows for the fifty-sixth straight week, while taxable bond funds (+$4.7 billion) ran their streak of net inflows to four. On the taxable bond fund side, the Core Plus Bond Funds (+$1.6 billion) and Core Bond Funds (+$1.3 billion) peer groups led the charge, while High Yield Muni Debt Funds (+$588 million) and General Muni Debt Funds (+$539 million) paced the tax-exempt side.
Money Market Mutual Funds
Money market funds saw $11.6 billion leave their coffers this week. The majority of this asset group’s peer groups saw money leave, with the largest net outflows being attributable to Institutional U.S. Government Money Market Funds (-$4.7 billion) and Institutional U.S. Treasury Money Market Funds (-$4.7 billion). Conversely, Money Market Instrument Funds and Institutional Money Market Funds had net inflows of $1.6 billion and $761 million, respectively.