U.S. Weekly FundFlows Insight Report: Short/Intermediate IG ETFs Log Eighth Straight Weekly Inflow

The data in the article below is sourced from Lipper’s Global Fund Flows application. GFF can be found on LSEG Workspace (“FundFlows”).

During LSEG Lipper’s fund-flows week that ended May 1, 2024, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the second straight week, adding a net $22.0 billion.

This past week, money market funds (+$26.2 billion), municipal bond funds (+$515 million), and commodities funds (+$214 million) reported inflows.

Equity funds (-$4.2 billion), mixed-assets funds (-$444 million), taxable bond funds (-$253 million), and alternative investments funds (-$20 million) suffered outflows.

After seeing their third largest weekly outflow on record (-$118.5 billion), money markets have recorded back-to-back weeks of inflows.

Actively managed equity (-$4.4 billion) reported outflows for the sixth straight week, while passive equity funds (+$216 million) have attracted new capital in nine of the last 10 weeks. Actively managed fixed income funds (+$2.6 billion) saw its sixteenth weekly inflow over the past 18 weeks, as passive fixed income funds (-$2.4 billion) have seen outflows in two of the last three.

Spot bitcoin ETFs reported their first weekly outflow as a group, ending a streak of 15 straight inflows since launching.

Index Performance

At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported negative returns for the fourth week in five—the DJIA (-1.45%), Nasdaq (-0.68%), Russell 2000 (-0.76%), and S&P 500 (-1.05%) were all in the red.

Both the FTSE U.S. Broad Investment Grade Bond Total Return Index (+0.17%) and FTSE High Yield Market Total Return Index (+0.05%) saw gains on the week. The FTSE U.S. Municipal Tax-Exempt Investment Grade Bond Index suffered its seventh consecutive weekly loss.

Overseas broad-based indices realized mixed returns—the FTSE 100 (+1.49%) and Shanghai Composite (+2.06%) witnessed plus-side returns, whereas the Dax (-0.91%), Nikkei 225 (-2.15%), and S&P/TSX Composite (-1.04%) registered losses.

Rates/Yields

The two-year (+0.67%) rose, while the 10-year (-0.26%) Treasury yield fell over the course of the week. At the close of session Wednesday, the 10-two Treasury yield spread inverted slightly from last week.

According to Freddie Mac, the 30-year fixed-rate average (FRM) increased for the fifth consecutive week, with the weekly average currently at 7.22%—the highest level since November. Both the United States Dollar Index (DXY, -0.10%) and VIX (-3.77%) decreased over the course of the week.

The CME FedWatch Tool has the likelihood of the Federal Reserve cutting interest rates by 25 basis points (bps) at 14.2%. This tool forecasted a 62.5% possibility of a 25-bps cut one month ago. The next meeting is scheduled for June 12, 2024.

Exchange-Traded Equity Funds

Exchange-traded equity funds recorded a $912 million weekly inflow, the ninth inflow over the past 10 weeks. The macro-group posted a 0.97% loss on the week, the fourth negative return in five weeks.

Large-cap ETFs (+$2.3 billion), multi-cap ETFs (+$904 million), and developed international markets ETFs (+$771 million) were the top equity ETF groups to log inflows. Large-cap ETFs witnessed their eighth inflow in 10 weeks as they were led by Lipper’s Large-Cap Growth (+$1.4 billion) classification.

Sector equity ETFs (-$1.9 billion), small-cap ETFs (-$1.3 billion), and mid-cap ETFs (-$334 million) suffered the largest weekly outflows under equity ETFs. Health/Biotechnology ETFs (-$724 million) and Consumer Services ETFs (-$684 million) led sector equity to see its second weekly outflow in three.

Over the past fund-flows week, the two top equity ETF flow attractors were iShares Core S&P 500 ETF (IVV, +$1.7 billion) and Invesco QQQ Trust Series 1 (QQQ, +$928 million).

Meanwhile, the two bottom equity ETFs in terms of weekly outflows were SPDR S&P 500 ETF Trust (SPY, -$1.4 billion) and iShares Russell 2000 ETF (IWM, -$1.0 billion).

Exchange-Traded Fixed Income Funds

Exchange-traded taxable fixed income funds observed a $2.1 billion weekly outflow—the macro-group’s second outflow in three weeks. Fixed income ETFs reported a loss of 0.41% on average, the fifth weekly loss in seven.

Short/intermediate government & Treasury ETFs (-$2.6 billion), alternative bond ETFs (-$908 million), and general domestic taxable fixed income ETFs (-$365 million) were the top taxable fixed income ETF subgroup to witness outflows on the week. Short/intermediate government & Treasury ETFs saw their first outflow in four weeks as it suffered the largest outflow since the week ending January 31, 2024.

Government & Treasury ETFs (+$2.0 billion), short/intermediate investment-grade ETFs (+$108 million), and world income ETFs (+$51 million) were the top subgroups under taxable bond ETFs to observe inflows. Government & Treasury ETFs posted their sixth inflow over the past seven weeks, led by U.S. Mortgage ETFs (+$2.0 billion) which celebrated their largest weekly inflow since October 2022. After a record setting weekly inflow three weeks ago, short/intermediate investment-grade ETFs realize their eighth straight week of net new money.

Municipal bond ETFs reported an $89 million inflow over the week, marking the group’s third weekly inflow in four. Municipal bond ETFs saw their sixth weekly loss (-0.04%) in seven weeks.

iShares MBS ETF (MBB, +$1.4 billion) and iShares 20+ Year Treasury Bond ETF (TLT, +$645 million) attracted the largest amounts of weekly net new money under fixed income ETFs.

On the other hand, SPDR Portfolio Short Term Treasury ETF (SPTS, -$1.2 billion) and iShares iBoxx $Investment Grade Corporate Bond ETF (LQD, -$824 million) suffered the largest weekly outflows.

Conventional Equity Funds

Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$5.1 billion) for the one-hundred-and-sixteenth straight week. Conventional equity funds posted a weekly return of negative 0.92%, the fourth week of losses in five.

Multi-cap funds (-$1.3 billion), small-cap funds (-$671 million), and large-cap funds (-$657 million) were the top conventional equity fund subgroups to realize weekly outflows. Multi-cap conventional mutual funds posted their sixth consecutive week of outflows, led by Multi-Cap Core Funds (-$681 million).

No conventional equity mutual fund subgroups logged an inflow on the week.

Conventional Fixed Income Funds

Conventional taxable-fixed income funds realized a weekly inflow of $1.8 billion—marking the first inflow in four weeks. The macro-group logged a gain of 0.16% on average—their second straight week appreciating.

General domestic taxable fixed income funds (+$753 million), short/intermediate investment-grade funds (+$704 million), and high yield funds (+$256 million) were the top groups under taxable fixed income mutual funds to log inflows over the week. General domestic taxable fixed income funds were led by Lipper’s Loan Participation (+$268 million) and Multi-Sector Income funds (+$256 million). General domestic taxable fixed income funds have reported 18 inflows over the past 19 weeks.

Government & Treasury funds (-$112 million) and short/intermediate government & Treasury funds (-$77 million) were the only two taxable fixed income mutual fund subgroups to post weekly net outflows. Government & Treasury funds have seen four consecutive weekly outflows.

Municipal bond conventional funds (ex-ETFs) returned a negative 0.10% over the fund-flows week, giving the subgroup its sixth loss in seven weeks. Tax-exempt fixed income mutual funds experienced a $426 million inflow, marking the first inflow in the last four weeks.

*Lipper weekly fund flows period is from the prior Thursday through Wednesday.

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Quarterly Fund Market Insight Reports reveal that short-duration fixed income funds and large-cap/growth-oriented funds continue to lead the pack in performance, but not necessarily flows.