November 18, 2021

U.S. Weekly FundFlows Insight Report: Taxable Bond Funds and ETFs Attract the Largest Long-Term Net Inflows for the Week

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, injecting a net $17.5 billion, for Refinitiv Lipper’s fund-flows week ended November 17, 2021. Fund investors were net purchasers of money market funds (+$11.9 billion), taxable bond funds (+$4.7 billion), and tax-exempt fixed income funds (+$1.4 billion), while being net redeemers of equity funds (-$465 million) for the week.

Market Wrap-Up

Markets remained range bound during the fund-flows week as investors continued to cheer strong Q3 earnings reports and a better-than-expected October retail sales report, while keeping a keen eye on inflation, supply chain disruptions, oil prices, and interest rates. The broad-based indices remained within striking distance of new highs but ended the week generally flat—except for the Nasdaq, which benefitted from a late retreat in Treasury yields and a subsequent rally in large-cap technology stocks.

On the domestic side of the equation, the Nasdaq Composite Price Only Index (+1.91%) posted the strongest returns of the broadly followed U.S. indices for the fund-flows week. It was followed by the S&P 500 Price Only Index (+0.90%). The Russell 2000 Price Only Index (-0.53%) witnessed the largest declines for the week. Overseas, the Shanghai Composite Price Only Index (+1.44%) chalked up the strongest performance of the often-followed broad-based international indices, while the FTSE 100 Price Only Index (-0.73%) suffered the largest declines.

On Thursday, November 11, 2021, U.S. stocks ended mostly higher on chipmakers’ gains despite disappointing earnings news from Disney. The bond market was closed in observance of Veterans Day. The stock market posted modest gains after witnessing declines on Wednesday, November 10, that were triggered by U.S. inflationary data which showed a 6.2% year-over-year rise—a nearly 31-year high and significantly above the Federal Reserve’s target rate of 2%.

The DJIA managed to close above the 36,000 mark again on Friday, November 12, despite continued concerns about inflation. As might be expected given those rising concerns, the University of Michigan’s November gauge of consumer sentiment slipped to 66.8 from 71.7 for the month prior, its lowest reading since 2011. The 10-year Treasury yield rose seven basis points (bps) for the week, closing at 1.58% on the day.

On Monday, November 15, the three major indices closed down for the day as investors continued to focus on inflation concerns and digest the possible impact of President Joe Biden signing into law the $1 trillion infrastructure spending bill. The 10-year Treasury yield jumped five bps to close the day at 1.63% as many pundits expect the Federal Reserve Board to accelerate its tapering plans given the signs of persistent inflation. Front-month crude oil futures rose slightly to settle at $80.88 per barrel (bbl).

The Nasdaq led the U.S. indices higher on Tuesday, November 16, after the government reported that October U.S. retail sales rose 1.7%, its largest month-over-month gain since March, beating analyst expectations of a 1.5% rise. In other news, U.S. October industrial production climbed a seasonally adjusted 1.6%, beating economists’ expectations of 0.8%.

Despite gains from large-cap technology stalwarts Tesla and Apple for the day, U.S. indices generally finished lower on Wednesday, November 17, as inflationary and COVID-related concerns continued to keep the markets in check. A three bps decline in the 10-year Treasury yield helped lift large-cap technology stocks. However, U.S. crude oil prices slid 3%, settling at $78.36/bbl after President Biden said there was “mounting evidence of anti-consumer behavior by oil and gas companies” in a letter to the Federal Trade Commission. Near-month gold futures settled at $1,870.20/oz.—its highest finish since June.

Exchange-Traded Equity Funds

Equity ETFs witnessed their seventh consecutive week of net inflows—taking in $1.8 billion for the most recent fund-flows week. Authorized participants (APs) were net purchasers of domestic equity ETFs (+$878 million), injecting money also for the seventh week in a row. However, for the twenty-first straight week, nondomestic equity ETFs witnessed net inflows, attracting $875 million this past week. Sector-other ETFs (+$1.0 billion) attracted the largest draw of net new money, followed by international equity ETFs (+$860 million) and equity income ETFs (+$669 million). Meanwhile, sector-energy ETFs (-$688 million) suffered the largest net redemptions of the equity ETF macro-groups for the flows week.

iShares Core S&P 500 ETF (IVV, +$1.3 billion) and Invesco S&P 500 Low Volatility ETF (SPLV, +$744 million) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, SPDR S&P 500 ETF (SPY, -$3.1 billion) experienced the largest individual net redemptions, and Invesco QQQ Trust 1 ETF (QQQ, -$1.5 billion) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the sixth week running, taxable fixed income ETFs witnessed net inflows, attracting $2.4 billion this last week. APs were net purchasers of government-Treasury ETFs (+$2.5 billion), corporate investment-grade ETFs (+$101 million), and corporate high yield ETFs (+$100 million) while being net redeemers of flexible ETFs (-$207 million) and government-mortgage ETFs (-$138 million). iShares 20+ Year Treasury Bond ETF (TLT, +$834 million) and iShares TIPS Bond ETF (TIP, +$535 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, -$1.1 billion) and iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB, -$209 million)  handed back the largest individual net redemptions for the week.

For the first week in 38, municipal bond ETFs witnessed net outflows. These, however, were minimal, with investors handing back just $56 million this week. iShares Short-Term National Muni Bond ETF (SUB, +$21 million) and Dimensional National Municipal Bond ETF (DFNM, +$10 million) witnessed the largest draws of net new money of the municipal bond ETFs in the subgroup for the week.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net sellers of equity funds for the sixth week in a row—redeeming $2.2 billion. The macro-group recorded a market gain of 0.84% for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly less than $2.7 billion, witnessed their twenty-first consecutive week of net outflows while experiencing a 0.91% market gain on average for the fund-flows week. Nondomestic equity funds—posting a 0.68% weekly return on average—observed their second week of net inflows, taking in $437 million.

On the domestic equity side, fund investors were net redeemers of large-cap funds (-$2.2 billion) and mid-cap funds (-$310 million). Investors on the nondomestic equity side were net purchasers of international equity funds (+$564 million) but were net redeemers of global equity funds (-$127 million) for the week. Oakmark Fund, R6 Shares (OAZMX, +$870 million) and MFS Growth Fund, I Shares (MFEIX, +$478 million) attracted the largest amounts of net new money of all individual equity funds for the week.

Conventional Fixed Income Funds

For the sixth week in a row, taxable bond funds (ex-ETFs) witnessed net inflows—taking in $2.3 billion this past week—while posting a 0.13% loss on average for the fund-flows week. Investors were net purchasers of corporate investment-grade debt funds (+$1.3 billion), flexible funds (+$632 million), and government-Treasury funds (+$439 million) while being net redeemers of government-mortgage funds (-$108 million) and corporate high-quality funds (-$83 million). Baird Core Plus Bond Fund, Institutional Shares (BCOIX, +$415 million) and Virtus AllianzGl Income & Growth Fund, Institutional Shares (AZNIX, +$265 million) took in the largest amounts of net inflows of all individual taxable fixed income funds during the week.

The municipal bond funds group posted a 0.16% loss on average during the week and witnessed its fourth consecutive week of net inflows, attracting $1.5 billion this week. High Yield Municipal Debt Funds (+$539 million) and General & Insured Municipal Debt Funds (+$518 million) experienced the largest net inflows of the group, while Short Municipal Debt Funds (-$168 million) suffered the largest net redemptions. Hartford Municipal Opportunities Fund, Class I Shares (HHMIX, +$183 million) and Goldman Sachs Short Duration Tax-Free Fund (GANPX, +$128 million) took in the largest draws of net new money of the individual tax-exempt fixed income funds for the week.

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