During the fund-flows week ended December 16, 2015, investors became somewhat bipolar ahead of the U.S. Federal Reserve’s two-day policy meeting, while oil prices’ continued to slide to lows not seen since 2009. OPEC’s most recent report showed the cartel’s oil output had risen to its highest level since 2012—perpetuating the global glut in supplies and becoming a major drag on the markets. At the beginning of the flows week investors learned of a meltdown in Third Avenue Focused Credit Fund, which weighed heavily on other high-yield offerings as investors began to wonder if the related selloff might extend into other funds in the group.
A two-day turnaround in oil prices and anticipation that the Fed would pull the trigger to raise its short-term lending rate in December pushed stocks higher in the middle of the flows week, with many investors believing conditions for a Santa Claus rally were beginning to take shape for the latter half of December. By the end of the flows week investors appeared to embrace the decision by the Fed to raise its key interest rate for the first time in almost ten years, extending equity gains to a third straight session.
Despite the late-week optimism, investors were net redeemers of conventional mutual fund assets (excluding exchange-traded funds [ETFs]), withdrawing a net $42.0 billion for the fund-flows week ended December 16. Investors turned their back on equity funds, fixed income funds, and money market funds, redeeming $17.3 billion, $13.7 billion, and $11.3 billion net, respectively, for the week, but they padded the coffers of municipal bond funds (+$0.3 billion) ahead of tax season.
Source: Thomson Reuters Lipper
Keep in mind that year-end distributions can play a factor in the weekly flows calculations, if they fall on a total-net-assets (TNAs) reporting day (the TNAs decline by the amount of the distribution and climb back up the next day after being reinvested). This, along with the impact of tax selling at year-end can have major seasonal impacts on estimated net flows at year-end. So, some of the big swings we witnessed this past week may be offset next week. It’s interesting to note that, looking at flows for conventional equity funds (ex-ETFs), six of the seven largest weekly net outflows occurred in December, with this past week’s outflows of $17.3 billion being the third largest since Lipper began calculating weekly net flows in 1992.
