June 10, 2021

U.S. Weekly FundFlows Insight Report: Investors Pad Equity Income, Real Estate Coffers for Funds and ETFs

by Tom Roseen.

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the fifth week in a row. They injected a net $3.7 billion for Refinitiv Lipper’s fund-flows week ended June 9, 2021. Fund investors were net purchasers of taxable bond funds (+$6.8 billion), tax-exempt fixed income funds (+$2.5 billion), and equity funds (+$717 million), while being net sellers of money market funds (-$6.3 billion) for the week.

Market Wrap-Up

Returns for the broad-based U.S. indices were generally on the plus-side as investors weighed a Goldilocks nonfarm payrolls report while keeping a keen eye on inflationary data and a flattening yield curve during the fund-flows week. Equity markets remained range bound, hovering near market record highs, while the 10-year Treasury declined 12 basis points (bps) to 1.50% on June 9.

Despite some minor turbulence for stocks, on the domestic side of the equation, the Russell 2000 Price Only Index (+1.27%) witnessed the strongest plus-side returns of the other broadly followed U.S. indices for the fund-flows week. It was followed by the NASDAQ Composite Price Only Index (+1.13%). The Dow Jones Industrial Average Price Only Index (-0.44%) witnessed the only negative returns for the week. Overseas, the Shanghai Composite Price Only Index (-0.24%) mitigated losses better than the other often-followed broad-based global indices, while the FTSE 100 Price Only Index (-0.65%) was the relative laggard.

On Thursday, June 3, 2021, the Dow snapped a five-day winning streak as upbeat economic data pushed Treasury yields higher and weighed on growth- and tech-oriented issues. The May ISM’s services survey rose to 64% from 62.7% in April, and the May private-sector employment figures jumped to 978,000, according ADP Payroll Services. First-time jobless claims for the week prior dropped to 385,000—the first reading below 400,000 since the beginning of the COVID-19 pandemic. U.S. stocks closed higher on Friday, June 4, after a Goldilocks May nonfarm payrolls report showed the U.S. added 559,000 jobs, missing analysts’ expectations of 671,000. This perhaps is leading investors to believe that the Federal Reserve will continue with its easy money policy, at least in the short run. Interest rates moved lower, which was a tailwind for tech- and growth-focused issues even as investors focused on the ongoing infrastructure spending negotiations.

The NASDAQ and the Russell 2000 posted gains on Monday, June 7, even as the DJIA lost some ground after briefly surpassing a new high as investors awaited the release of inflationary data later in the week. Treasury yields rose slightly on the day. On Tuesday, June 8, stocks remained stuck in a trading range, but the NASDAQ and S&P 500 managed to finish the day slightly higher as investors remained somewhat pensive ahead of the update on inflation and after the 10-year Treasury yield declined to 1.53%. Oil futures rose on the day, clawing their way to at least a two-year high of $70.05/barrel (bbl). And, on Wednesday, June 9, the Dow booked its third day of losses as investors kept their focus on the upcoming May consumer-price index report due on Thursday. Despite inflationary concerns, the 10-year Treasury yield declined to 1.50%, its lowest closing value since March 3, 2021, and near-month crude oil prices declined to $69.96/bbl.

Exchange-Traded Equity Funds

Equity ETFs witnessed their second week of net inflows in three—attracting $3.6 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$1.5 billion), injecting money also for the second week in three. Nondomestic equity ETFs witnessed net inflows for the twenty-fifth week running, attracting $2.1 billion this past week. iShares MSCI Eurozone ETF (EZU, +$1.4 billion) and iShares US Real Estate ETF (IYR, +$1.2 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, iShares Core S&P 500 ETF (IVV, -$2.2 billion) experienced the largest individual net redemptions, and SPDR S&P 500 ETF (SPY, -$1.8 billion) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the fifth week in a row, taxable fixed income ETFs witnessed net inflows, taking in $970 million this last week. APs were net purchasers of government-Treasury ETFs (+$1.0 billion), flexible ETFs (+$447 million), and international & global debt ETFs (+$336 million), while being net redeemers of corporate investment-grade debt ETFs (-$695 million). iShares 20+ Year Treasury Bond ETF (TLT, +$594 million) and SPDR Blackstone Senior Loan ETF (SRLN, +$390 million) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD, -$1.2 billion) and SPDR Bloomberg Barclays High Yield ETF (JNK, -$546 million) handed back the largest individual net redemptions for the week. For the fifteenth week in a row, municipal bond ETFs witnessed net inflows, taking in $635 million this week, their third largest weekly net inflows on record going back to September 12, 2007, when Lipper began tracking weekly flows into municipal bond ETFs.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net redeemers of equity funds for the tenth consecutive week—withdrawing $2.9 billion this week—with the macro-group posting a 0.14% market return for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly more than $2.6 billion, witnessed their twenty-fourth consecutive weekly net outflows while experiencing a 0.27% gain on average for the fund-flows week. Nondomestic equity funds—posting a 0.16% weekly loss on average—observed their second consecutive week of net outflows, but they handed back just $230 million this past week. On the domestic equity side, fund investors shunned large-cap funds (-$1.6 billion) and mid-cap funds (-$1.0 billion). Investors on the nondomestic equity side were net purchasers of international equity funds (-$141 million) and global equity funds (-$89 million).

Conventional Fixed Income Funds

For the third consecutive week, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $5.8 billion this past week—while posting a 0.24% gain for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$3.9 billion), flexible funds (+$1.5 billion), and international & global debt funds (+$415 million), while being net redeemers of corporate high-yield funds (-$591 million). The municipal bond funds group posted a 0.45% gain on average during the week and witnessed its tenth straight week of net inflows, attracting $1.8 billion this week. High Yield Municipal Debt Funds (+$635 million) experienced the largest net inflows of the group, followed closely by General & Insured Municipal Debt Funds (+$585 million).

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