ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August

Takeaway: Tax loss selling continued in bonds with the biggest outflow in 3 months while the combination of equity ETFs and funds had strong inflow

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

Total equity mutual funds experienced slight inflows for the week ending December 18th with a $433 million subscription, making it 9 of 10 weeks of total stock fund inflow. Within the total equity fund result, domestic equity mutual funds lost $2.6 billion with international equity funds posting a $3.1 billion inflow. Despite these mixed trends both categories of equity mutual funds have averaged positive flow in 2013 with an average weekly subscription of $3.0 billion weekly year-to-date, a complete reversal from 2012's $3.0 billion weekly outflow 

 

Fixed income mutual funds continued persistent outflows during the most recent 5 day period with another $8.1 billion withdrawn from bond funds, the worst outflow in 3 months. This week's draw down worsened sequentially from the $6.7 billion outflow the week prior and ongoing redemptions have now forced the 2013 weekly average for all fixed income funds to a $1.4 billion outflow, which compares to the strong weekly inflow of $5.8 billion throughout 2012

 

ETFs experienced positive trends in the most recent 5 day period, with equity products seeing heavy inflows and fixed income ETFs seeing slight inflows week-to-week. Passive equity products gained $9.9 billion for the 5 day period ending December 18th with bond ETFs experiencing a $293 million inflow. ETF products also reflect the 2013 asset allocation shift, with the weekly averages for equity products up year-over-year versus bond ETFs which are seeing weaker year-over-year results


 

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 1

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 2

 

 

For the week ending December 18th, the Investment Company Institute reported slight equity inflows into mutual funds with $433 million flowing into total stock funds. The breakout between domestic and world stock funds separated to a $2.6 billion outflow into domestic stock funds and a $3.1 billion inflow into international or world stock funds. These results for the most recent 5 day period compare to the year-to-date weekly averages of a $384 million inflow for U.S. funds and a running $2.6 billion weekly inflow for international funds. The aggregate inflow for all stock funds this year now sits at a $3.0 billion inflow, an average which has been getting progressively bigger each week and a complete reversal from the $3.0 billion outflow averaged per week in 2012.

 

On the fixed income side, bond funds continued their weak trends for the 5 day period ended December 18th with outflows staying persistent within the asset class. The aggregate of taxable and tax-free bond funds booked a $8.1 billion outflow, a sequential decay from the $6.7 billion lost in the prior 5 day period and the worst weekly outflow in over 3 months since the $9.3 billion redemption in the final week of August. Both categories of fixed income contributed to outflows with taxable bonds having redemptions of $5.6 billion, which joined the $2.5 billion outflow in tax-free or municipal bonds. Taxable bonds have now had outflows in 25 of the past 29 weeks and municipal bonds having had 29 consecutive weeks of outflow. These redemptions late in the year are likely tax loss selling related with the Barclay's Aggregate Bond index down nearly 2% in 2013, the first annual loss in 14 years. The 2013 weekly average for fixed income fund flows is now a $1.4 billion weekly outflow, a sharp reversal from the $5.8 billion weekly inflow averaged last year.

 

Hybrid mutual funds, products which combine both equity and fixed income allocations, continue to be the most stable category within the ICI survey with another $483 million inflow in the most recent 5 day period, although the past 4 weeks have been below year-to-date averages. Hybrid funds have had inflow in 27 of the past 29 weeks with the 2013 weekly average inflow now at $1.5 billion, a strong advance versus the 2012 weekly average inflow of $911 million.

 

 

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 3

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 4

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 5

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 6

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 7

 

 

Passive Products:

 

 

Exchange traded funds had positive trends within the same 5 day period ending December 18th with equity ETFs posting a strong $9.9 billion inflow, the fifth consecutive week of positive equity ETF flow. The 2013 weekly average for stock ETFs is now a $3.4 billion weekly inflow, nearly a 50% improvement from last year's $2.2 billion weekly average inflow.

 

Bond ETFs experienced moderate inflow for the 5 day period ending December 18th with a $293 million subscription, a deceleration from the week prior which produced a $986 million inflow for passive bond products. Taking in consideration this most recent data however, 2013 averages for bond ETFs are flagging with just a $268 million average weekly inflow for bond ETFs, much lower than the $1.0 billion average weekly inflow for 2012.

 

 

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 10

ICI Fund Flow Survey - Worst Bond Outflow in over 3 Months Since August  - ICI chart 9

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 


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