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October 22, 2020

U.S. Weekly FundFlows Insight Report: ETF and Fund Investors Focus on Fixed Income During the Fund-Flows Week

by Tom Roseen.

Investors were overall net redeemers of fund assets (including those of conventional funds and ETFs) for the eleventh week in a row, withdrawing $7.6 billion for Refinitiv Lipper’s fund-flows week ended October 21, 2020 as they paid attention to increasing uncertainty in the market. Fund investors were net redeemers of money market and equity funds during the week, withdrawing $9.3 billion and $5.7 billion, respectively, while being net purchasers of taxable fixed income funds (+$6.8 billion) and municipal bond funds (+$607 million) this week.

Market Wrap-Up

U.S. markets finished in the red for the fund-flows week as investors evaluated the impact of an increasing number of COVID-19 cases, both in the U.S. and abroad, the lack of agreement on another round of fiscal stimulus on Capitol Hill, and the upcoming presidential election on the market and general economy.

On the domestic side of the equation, the NASDAQ Composite Price Only Index (-2.41%) suffered the largest declines for the fund-flows week of the broadly followed U.S. indices, while the Dow Jones Industrial Average Price Only Index (-1.06%) did the best job mitigating losses. Overseas, the Nikkei 225 Price Only Index (+0.71%) and the Shanghai Composite Price Only Index (+0.70%) chalked up the strongest plus-side returns of the often-followed broad-based global indices, while the Xetra DAX Price Only Index (-2.67%) experienced the largest decline.

On Thursday, October 15, the Dow snapped a three-day winning streak after investors learned about rising coronavirus cases that resulted in new business and travel restrictions. A rise in first-time weekly U.S. jobless claims from the week prior by 53,000 also cast a pall over the markets. On Friday, despite several states reporting record numbers of new COVID-19 cases the day before, the U.S. benchmarks closed higher after investors learned of better-than-expected September retail sales and consumer sentiment reports. Near-month gold prices witnessed their first weekly decline in three.

U.S. stocks tumbled on Monday, October 19, with the Dow booking its worst day in four weeks as investors worried about the lack of a stimulus package being completed before the November 3 elections. Investors shrugged off news that China’s Q3 GPD grew by 4.9%, instead focusing on lawmakers’ inability to strike agreement on a new fiscal stimulus plan. However, on Tuesday, the market was lifted after House Speaker Nancy Pelosi indicated that stimulus talks weren’t over. Investors were also lifted by news that September housing starts rose by almost 2% and building permits rose by 5.2%, both beating analyst expectations. On Wednesday, stocks sagged after Senate Majority Leader Mitch McConnell urged the White House and Republicans against striking a big coronavirus deal ahead of the elections.

Exchange-Traded Equity Funds

Equity ETFs witnessed net inflows for the second consecutive week—however, they attracted just $304 million for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$64 million), injecting money also for the second week in a row. And for the fourth week running, nondomestic equity ETFs witnessed net inflows, taking in $240 million this past week. SPDR S&P 500 ETF (SPY, +$5.2 billion) and iShares ESG Aware MSCI EM ETF (ESGE, +$563 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Invesco QQQ Trust 1 ETF (QQQ, -$2.1 billion) experienced the largest individual net redemptions, and iShares Russell 2000 ETF (IWM, -$1.1 billion) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the fourth straight week, taxable fixed income ETFs witnessed net inflows, taking in $1.7 billion this last week. APs were net purchasers of corporate investment-grade debt ETFs (+$1.4 billion) and government-Treasury ETFs (+$395 million) while being net redeemers of corporate high-yield ETFs (-$289 million) and flexible funds (-$158 million). iShares 10+ Year Investment Grade Corporate Bond ETF (IGLB, +$580 million) and iShares 10-20 Year Treasury Bond ETF (TLH, +$358 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB, -$776 million) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, -$632 million) handed back the largest individual net redemptions for the week. For the first week in three, municipal bond ETFs witnessed net outflows, handing back $117 million this week.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net redeemers of equity funds for the twenty-sixth week in a row, withdrawing $6.0 billion this week, with the macro-group posting a 1.19% market decline for the fund-flows week (its first week of negative returns in four). Domestic equity funds, suffering net redemptions of slightly less than $4.7 billion, witnessed their nineteenth consecutive weekly net outflows while posting a 1.40% decline on average for the fund-flows week. Nondomestic equity funds—posting a 0.73% market loss on average—experienced their ninth consecutive week of net outflows, handing back $1.3 billion this past week. On the domestic equity side, fund investors shunned large-cap funds (-$4.1 billion), while equity income funds were the main attractors of investors’ assets (+$235 million). Investors on the nondomestic equity side were net redeemers of international equity funds (-$976 million) while being net redeemers of global equity funds (-$309 million).

Conventional Fixed Income Funds

For the third consecutive week, taxable bond funds (ex-ETFs) witnessed net inflows—attracting $5.1 billion this past week—while posting a 0.40% loss for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$5.3 billion), corporate high-yield funds (+$439 million), and government-Treasury and mortgage funds (+$434 million), while flexible funds (-$1.5 billion) witnessed the largest net outflows of the group. Municipal bond funds (ex-ETFs) witnessed net inflows for the third week in a row, taking in $724 million. The municipal bond fund group posted a 0.06% loss on average during the week, posting its second decline in three weeks.

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Watch our weekly fund-flows video: Refinitiv Lipper Weekly U.S. Fund Flows Video Series – October 21, 2020

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