by Pat Keon, CFA.
Refinitiv Lipper’s fund asset groups (including both mutual funds and ETFs) suffered net negative flows of $15.4 billion for the fund-flows trading week ended Wednesday, October 28. This week’s results marked the fifteenth straight overall net outflows for funds. As has been the recent trend, equity funds (-$11.0 billion) and money market funds (-$6.3 billion) were responsible for all of the net outflows while taxable bond funds (+$1.4 billion) and municipal bond funds (+$582 million) both took in net new money.
The equity indices took a nosedive during the fund-flows trading week as the Dow Jones Industrial Average, S&P 500 Index, and NASDAQ Composite Index retreated 6.0%, 4.8%, and 4.2%, respectively.
After a positive start to the week, the equity markets faded in the second half and recorded their worst losses since the height of the pandemic fears back in mid-March. This negative performance was driven by the realization that despite continued talks between the two political parties, the best-case scenario for a second stimulus package from the federal government would not be until sometime after the presidential election. The Federal Reserve has previously stated that a second stimulus bill is essential to sustaining the current economic recovery. Another contributing factor to the downturn in the markets was the resurgence in the number of COVID-19 cases across the nation and rumblings about more restrictive policies to combat this increase.
ETFs (-$5.3 billion) suffered net negative flows that were driven by the equity (-$4.4 billion) and taxable bond (-$933 million) asset groups. On the equity side of the ledger, the largest individual net outflows belonged to SPDR S&P 500 ETF (SPY, -$2.1 billion) and Invesco QQQ ETF (QQQ, +$1.6 billion). For taxable bonds, iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and iShares 7-10 Year Treasury Bond ETF (IEF) led the net negative flows at minus $2.5 billion and minus $640 million, respectively. Muni bond ETFs took in $41 million of net new money for the week.
Equity Mutual Funds
Equity mutual funds (-$6.6 billion) extended their net outflows streak to 27 weeks. Domestic equity funds (-$5.0 billion) accounted for the majority of this week’s net negative flows, while nondomestic equity funds saw $1.6 billion leave. The largest net negative flows at the peer group level were attributable to Large-Cap Growth Funds (-$1.5 billion) and International Multi-Cap Core Funds (-$538 million).
Fixed Income Mutual Funds
The taxable bond (+$2.4 billion) and municipal bond (+$542 million) fund groups both had net inflows for the week. For the taxable bond fund peer groups, Core Bond Funds (+$941 million) and Ultra Short Obligation Funds (+$687 million) led the net positive flows. Short Muni Debt Funds (+$521 million) paced the tax-exempt fund groups.
Money Market Mutual Funds
Money market funds (-$6.4 billion) saw net money leave for the fourteenth consecutive week. The largest net outflows this week belonged to the Institutional U.S. Government Money Market Funds (-$10.7 billion) and Money Market Instrument Funds (-$2.3 billion) peer groups.