LIPPER FUND FLOWS: RECORD-BREAKING NET OUTFLOWS FOR ETFs

Further evidence of a slowing Chinese economy dragged equities down with the Dow Jones Industrial Average dropping just under 2% for the flows week ended February 5, 2014. The index dropped more than 300 points on Monday as emerging markets continued to bleed capital amid growing fears of a global slowdown with deflation concerns once again changing views on Europe.

REUTERS/Beawiharta

Equity mutual fund investors took the news in stride and added about $1.5 billion of net new money for the week, which was still sharply down from their four-week average. Exchange-traded fund (ETF) investors (especially one in particular) added fuel to the fire by withdrawing a net $22.3 billion from their accounts—for their highest weekly net outflows on record, surpassing the $19.5 billion of outflows for the week ended June 25, 2008.

Lipper’s top classification draws for mutual fund investors this past week were International Multi-Cap Core Funds (+$764 million net) and Long/Short Equity Funds (+$413 million net). Equity ETF investors dropped SPDR S&P 500 (SPY, -$7.6 billion) like a hot potato and didn’t treat iShares MSCI Emerging Markets (EEM, -$2.5 billion) much kinder.

Taxable bond mutual fund investors followed up the previous week’s $2.3 billion net purchases with another $1.3 billion. High Yield Funds followed the equity markets and suffered net outflows of $368 million, while Loan Participation Funds had net inflows of $218 million. Bond ETF investors were especially active, pumping a record $9.4 billion net into these products.

Treasury products received the bulk of the SPY and EEM outflows; iShares 1-3 Year Treasury Bond (SHY, +$3.6 billion) and iShares 3-7 Year Treasury Bond (IEI, +$3.6 billion) had incredible net inflow results. Municipal bond fund investors, perhaps spooked that Puerto Rico’s credit rating was dropped to junk status by S&P, were net sellers of $228 million. Money market funds had net inflows of $10.7 billion; retail investors were buyers (+$3.5 billion net), as were institutional types ($2.2 billion net).

For more information on this week’s Lipper fund flows data, please see this week’s video: