August 13, 2020

Refinitiv Lipper U.S. Weekly FundFlows Insight Report: Investors Favor ETFs over Mutual Funds

by Pat Keon, CFA.

Overall, Refinitiv Lipper’s fund asset groups (including both mutual funds and ETFs) had net negative flows of $470 million for the fund-flows trading week ended Wednesday, August 12. Taking a more granular look at this data shows that ETFs had net inflows of $12.7 billion while mutual funds suffered net outflows of $13.2 billion.

For the week, the only fund asset group to experience net outflows were money market funds (-$17.3 billion). Taxable bond funds paced the net inflows at $8.8 billion, while equity funds (+$5.7 billion) and municipal bond funds (+$2.3 billion) also had net positive flows.

Market Overview

The equity indices all recorded positive results for the fund-flows trading week. The Dow Jones Industrial Average led the way, returning 2.9%, followed by the S&P 500 Index (+1.6%) and the NASDAQ Composite Index (+0.1%).

It was a mixed assortment of news this week on the economic and COVID-19 fronts. The Federal Reserve strongly encouraged Congress on multiple occasions that another stimulus bill was needed to help America through the COVID-19 crisis. Despite these urgings, the two political parties could not agree on terms for a new bill. President Donald Trump tried to fill the gap left by Congress with an executive order which focused on the extension of the monetary stipend (although at a lesser amount) that had previously been added to unemployment benefits, eviction protection, a payroll tax cut, and student loan deferral.

Economically, the Fed warned that the U.S. could expect muted growth as long as restrictions remain in place due to the virus. On the positive side, there was an overall increase in job openings, the producer price index experienced its largest increase (+0.6%) since October 2018, and consumer prices rose by more than anticipated last month.

Looking forward, it was announced earlier today that first-time unemployment claims dipped below one million for the first time since March. New unemployment applications fell to 963,000 in a sign that the labor market recovery is starting to gain momentum.

ETFs

ETFs took in $12.7 billion of net new money. These net inflows were driven by equity ETFs (+$9.4 billion), while taxable bond (+$3.0 billion) and municipal bond ETFs (+$386 million) also contributed to the total net inflows. The largest individual net inflows among equity ETFs belonged to Invesco QQQ Trust (QQQ, +$2.0 billion), iShares Russell 2000 ETF (IWM, +$1.3 billion), and SPDR S&P 500 ETF (SPY, +$1.3 billion). The net positive flows for taxable bond ETFs were paced by iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$616 million) and iShares TIPS Bond ETF (TIP, +$440 million).

 Equity Mutual Funds

Equity mutual funds (-$3.7 billion) saw net money leave for the seventeenth consecutive week. Domestic equity funds (-$2.8 billion) accounted for the bulk of the net outflows while nondomestic equity funds were responsible for $829 million of the total net negative flows. Drilling down to the peer group level, the largest net outflows belonged to Multi-Cap Core Funds (-$1.3 billion) and Global Equity Income Funds (-$251 million) among the domestic and nondomestic fund universes, respectively.

Fixed Income Mutual Funds

The taxable bond (+$5.9 billion) and tax-exempt bond (+$1.9 billion) groups ran their consecutive net inflows streaks to 18 and 14 weeks, respectively. For muni debt funds, the Short Muni Debt (+$644 million) and General Muni Debt (+$477 million) groups attracted the most net new money, while Core Plus Bond Funds (+$1.4 billion) and Core Bond Funds (+$1.3 billion) led the taxable bond fund peer groups.

Money Market Mutual Funds

Money market funds saw net money leave (-$17.3 billion) for the third straight week. The net outflows for this fund asset group were driven by the Institutional U.S. Government Money Market Funds (-$12.2 billion) and Institutional U.S. Treasury Money Market Funds (-$1.9 billion) peer groups.

 

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