Worries about soft global economic growth, political instability coming back to Greece, and the smoldering spread of the Ebola disease prompted big losses on the major indices for the flows week ended Wednesday, October 15th. Investors were seemingly of two minds about the week’s sell-off: retail investors pulled a net $1.5 billion from their accounts for the week, while institutional investors appeared to add a net $4.3 billion to equity exchange-traded funds (ETFs).
Our working theory is that these ETF inflows were likely due to large banks and institutions creating additional units for their clients to short, given the downdraft in the markets (a similar “inflow” to SPDR S&P 500 (SPY) during the depths of the financial crisis of 2008 lends credence to this theory). It was the third week in the past four that retail investors were net sellers of their investments. The week’s biggest “inflow” recipients were SPDR S&P 500 (SPY, +$2.7 billion) and iShares Russell 2000 (IWM, +$2.3 billion), while investors simply fled iShares Emerging Markets (EEM, -$916 million).
Taxable bond mutual fund investors continued to add money to their accounts; although lighter than the previous week’s huge jump. That group of funds saw net inflows of $3.3 billion for this past week as investors continued to seek the safety of high-quality bonds. Mutual funds in Lipper’s High Yield Funds classification returned to outflows again; this time $565 million was pulled from it, while Loan Participation Funds had net outflows of $869 million—for a fourteenth straight week of outflows. The week’s top destination for bond ETFs was iShares 7-10 Treasury Bond (IEF), with net inflows of $855 million. Municipal bond mutual fund investors added a net $356 million to their accounts as muni performance remained in the black. Money market funds saw net outflows of $18.2 billion, of which institutional investors redeemed $16.7 billion and retail investors pulled $1.5 billion.
For more information on this week’s Lipper fund flows data, please refer to Lipper’s U.S. Fund Flows website or this video.
