May 27, 2021

U.S. Weekly FundFlows Insight Report: Money Market Funds Draw $65.6 Billion—Largest Inflows in More Than a Year

by Jack Fischer.

During Refinitiv Lipper’s fund-flows week ended May 26, 2021, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the third consecutive week (+77.9 billion).

Money market funds (+$65.6 billion), equity funds (+$8.2 billion), taxable bond funds (+$2.6 billion), and tax-exempt bond funds (+$1.5 billion) all attracted net inflows over the trailing five trading days.

Market Wrap-Up

At the close of Refinitiv Lipper’s fund-flows week, both U.S. and overseas broad-based indices ended in the black. NASDAQ (+3.30%), Russell 2000 (+2.54%), S&P 500 (+1.95%), and DJIA (+1.26%) all recorded positive performance. The tech-rich NASDAQ logged its largest weekly gain in six weeks. Overseas, broad-based indices Shanghai Composite (+3.06%), DAX 30 (+2.24%), and  FTSE 100 (+0.95%) avoided losses as well. The 10-two Treasury yield spread (-6.36%) and the VIX (-17.8%) fell over the course of the week.

On Thursday, May 20, U.S. equity markets traded positive, with the NASDAQ (+1.77%) leading the way, ending a three-day slide. The 10-year Treasury yield fell 8.22% on the day, reversing its 7.29% spike the day before. Volatility in the yield curve can be attributed to the Federal Reserve’s release of its April meeting minutes which consisted of talks on slowing the asset purchasing program:

“A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”

Wednesday’s reaction and Thursday’s correction in Treasury yields reminded investors just how sensitive the market is to the Fed simply talking about a plan on lowering asset purchases in the future. The minutes did, however, say “the economy remained far from the Committee’s maximum-employment and price-stability goals,” which would suggest no forthcoming policy changes. The Federal Open Market Committee is looking for a string of reports much like the weekly unemployment report released Thursday that announced 444,000 Americans filed for first-time unemployment—the lowest weekly figure since the start of pandemic. On Friday, Refinitiv Proprietary Research revealed that of the 476 companies in the S&P 500 to have reported 2021 Q1 earnings, 87.2% have reported earnings above analyst expectations. U.S. broad-based equity markets traded mixed as the weekend approached and earnings season starts to come to an end.

On Monday, May 24, the NASDAQ (+1.41%) was once again the daily index winner while Treasury yields fell. U.S. COVID-19 cases and hospitalizations hit their lowest levels since June, even as restrictions and capacity limits ease. CDC reports that 62% of the U.S. adult population (18 and older) has at least one dose of the vaccine, while 50.6% are now fully vaccinated. Negative consumer sentiment and housing data led to U.S. equity markets trading in the red on Tuesday. The Conference Board released their Consumer Confidence Index and Expectation Index—both fell in May. U.S. new home sales also decreases month-over-month as their prices continue to rise.

To close our Refinitiv Lipper fund-flows week on Wednesday, the Russell 2000 (+1.97%) recorded the largest daily gain for all broad-based indices over the last five sessions. After a couple of volatile weeks in the markets, equity indices traded relatively subdued with the VIX closing at 17.46.

Exchange-Traded Equity Funds

Exchange-traded equity funds recorded $9.3 billion in weekly net inflows. The macro-group has now reported fifteen weeks of positive inflows in the last 16. On average equity ETFs posted a weekly return of 2.04%—the largest weekly return in six weeks.

Growth/value large-cap ETFs (+$4.1 billion) led all equity ETF sub-groups in net inflows and recouped some of their $4.8 billion in outflows last week. International equity ETFs (+$3.1 billion) have reported seven consecutive weeks of inflows greater than $1.0 billion during their current streak of 23 consecutive weeks of net inflows.

Sector-financial/banking ETFs suffered the largest weekly net outflows under equity ETFs (-$667 million). With all Treasury yields along the yield curve falling by at least 5.0% over the week, sector-financial/banking ETFs saw their first weekly outflows in six weeks. Sector-real estate ETFs witnessed the second largest weekly outflows (-$254 million) under the macro-group—marking their fourth consecutive week of outflows.

Over the past fund-flows week, three equity ETFs attracted more than $1.0 billion—Invesco QQQ Trust 1 (QQQ, +$1.6 billion), iShares: Core MSCI USA (QUAL, +$1.2 billion), and JPMorgan: BetaBuilders Europe (BBEU,+$1.1 billion). The top three equity ETFs in terms of weekly net outflows were SPDR S&P 500 ETF (SPY, -$880 million), Select Sector: Financial Sector SPDR (XLF, -$615 million), and iShares: Russell 2000 ETF (IWN, -$549 million).

Exchange-Traded Fixed Income Funds

Exchange-traded fixed income funds drew in $2.5 billion. This marks the macro-group’s third consecutive week of inflows and their seventh positive week in the last eight.

Government-Treasury ETFs (+$873 million), corporate high-yield ETFs (+$689 million), and flexible funds ETFs (+$359 million) saw the largest weekly inflows under the fixed income ETF macro-group. Government-Treasury ETFs logged their third consecutive week of net inflows, whereas flexible fund ETFs now have nine weeks in a row of inflows.

Corporate investment grade ETFs was the only subgroup to record net redemptions over the Refinitiv Lipper fund-flows week (-$181 million). The previous two weeks saw the subgroup attract more than $2.5 billion.

iShares:1-3 Treasury Bond ETF (SHY, +$543 million), iShares: Core US Aggregate Bond (AGG, +$386 million), and SPDR Bloomberg Barclays High Yield Bond (JNK, +$283 million) obtained the largest amounts of net new money under the macro-group. On the flip side, iShares: iBoxx Investment Grade Corporates (LQD, -$952 million), iShares:20+ Treasury Bond ETF (TLT, -$403 million), and iShares: Short Treasury Bond ETF (SHV,-$183 million) suffered the largest individual net redemptions.

Conventional Equity Funds

Conventional equity funds (ex-ETF) were net redeemers for the eighth consecutive week, watching $1.2 billion flow out of the macro-group. Each of the eight weekly outflows were more than $1.0 billion. Conventional equity funds posted a weekly return of 2.26%, on average—their largest weekly return in 15 weeks.

Conventional domestic equity funds also saw net redemptions and posted their fourteenth straight week of net outflows (-$1.7 billion). The four-week moving average for conventional domestic equity funds has been more than $1.0 billion in net outflows for more than a year straight. Non-domestic equities (ex-ETF) realized a net inflow of $552 million—its third consecutive week of inflows.

Despite returning 2.30% on average over the last fund-flows week, growth/value large-cap conventional funds suffered $1.3 billion in weekly net outflows, its forty-eighth straight week of outflows.

Conventional international equity and sector-other funds witnessed the top inflows, realizing $468 million and $184 million, respectively. International equity funds have seen three straight weeks of net inflows and reported their largest weekly return in 15 weeks (+2.39%).

Conventional Fixed Income Funds

Conventional fixed income funds realized net inflows of $138 million. The macro-group has now only recorded two weeks of net outflows this calendar year.

Conventional fixed income funds were led by the corporate-investment grade sub-group (+$1.1 billion), making their fifty-eighth straight week of net inflows. Conventional flexible funds followed right behind, posting $932 million in weekly net inflows—their sixth consecutive week of inflows.

Conventional corporate high-yield funds suffered the largest weekly outflows under the macro-group (-$2.1 billion). This makes back-to-back weeks of net outflows of more than $2.0 billion.

Conventional municipal bond funds returned positive 0.22% on average over the fund-flows week and took in $1.3 billion—their eighth week in a row of net inflows. Conventional municipal bond funds have only recorded four total weeks of net redemptions in the past year.

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