ICI Fund Flow Survey, Solid Equity Inflow

Takeaway: Both equity mutual funds and ETFs displayed solid trends in the most recent week with small but improving bond inflow into mutual funds.

Editor's note: This research note from Hedgeye's Financials team was originally published February 27, 2014 at 07:04 in Financials. For more information on how you can subscribe to Hedgeye click here.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

In the most recent week, both equity vehicles including mutual funds and ETFs had solid inflow trends with small but improving inflows into bond mutual funds as well.

 

ICI Fund Flow Survey, Solid Equity Inflow - 999

 

Total equity mutual funds produced a strong week of inflow with $5.8 billion of net subscriptions, a slight deceleration from the $7.2 billion inflow the week prior. The $5.8 billion inflow had a domestic bend during the most recent 5 day period, with $4.1 billion flowing into domestic equity funds and $1.7 billion flowing into international stock funds. The 2014 running weekly average inflow for equity mutual funds is now $4.9 billion, an improvement from the $3.0 billion weekly average inflow for 2013. 

 

Fixed income mutual funds also had net inflows during the 5 day period ending February 19th with $2.8 billion flowing into all fixed income funds. The breakout of improving bond inflow amounted to $2.4 billion into taxable products and a $422 million inflow into tax-free or municipal products, the 6th consecutive week of inflow into munis after 33 consecutive weeks of outflow. The 2014 weekly average for fixed income mutual funds now stands at a $523 million weekly inflow, an improvement from 2013's weekly average outflow of $1.5 billion but a far cry from the $5.8 billion weekly average inflow from 2012 (our view of the blow off top in bond fund inflow).

 

ETFs had mixed trends during the week, with a strong week of subscriptions in stock ETFs with $8.9 billion in net inflow with bond ETFs experiencing withdrawals of $625 million. The 2014 weekly averages are now a $3.3 billion weekly outflow for equity ETFs and a $2.3 billion weekly inflow for fixed income ETFs. 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $12.6 billion spread for the week ($14.8 billion of total equity inflow versus the $2.2 billion inflow within fixed income; positive numbers imply inflows for stocks; negative numbers imply inflows for bonds). The 52 week moving average has been $6.9 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) and a 52 week low of -$36.9 billion (negative numbers imply a net inflow into bonds for the week). 

 

Continued strong equity mutual fund inflow trends currently support our favorite long idea in the sector, T Rowe Price (TROW) which should benefit with a leading retail equity mutual fund franchise. In addition, we recently added Legg Mason (LM) to our Best Ideas list on the long side to capture the emerging trends on the institutional side of the industry which is experiencing inflow into fixed income and outflow in equities (see our Legg report here).

 

Mutual fund flow data is collected weekly from the Investment Company Institute (ICI) and represents a survey of 95% of the investment management industry's mutual fund assets. Mutual fund data largely reflects the actions of retail investors. Exchange traded fund (ETF) information is extracted from Bloomberg and is matched to the same weekly reporting schedule as the ICI mutual fund data. According to industry leader Blackrock (BLK), U.S. ETF participation is 60% institutional investors and 40% retail investors.   

 

 

ICI Fund Flow Survey, Solid Equity Inflow - ici

 

 ICI Fund Flow Survey, Solid Equity Inflow - ICI chart 2

 

 

Most Recent 12 Week Flow in Millions by Mutual Fund Product:

 

 

ICI Fund Flow Survey, Solid Equity Inflow - ICI chart 3

 

ICI Fund Flow Survey, Solid Equity Inflow - ICI chart 4

 

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Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds:

  

 

ICI Fund Flow Survey, Solid Equity Inflow - ICI chart 8

 

ICI Fund Flow Survey, Solid Equity Inflow - ICI chart 9

 

 

Net Results:

 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $12.6 billion spread for the week ($14.8 billion of total equity inflow versus the $2.2 billion inflow within fixed income; positive numbers imply inflows for stocks; negative numbers imply inflows for bonds). The 52 week moving average has been $6.9 billion (positive spread to equities), with a 52 week high of $30.9 billion (positive spread to equities) and a 52 week low of -$36.9 billion (negative numbers imply a net inflow into bonds for the week). 

 

 

ICI Fund Flow Survey, Solid Equity Inflow - ICI chart 10 

 

 

Continued strong equity mutual fund inflow trends currently support our favorite long idea in the sector, T Rowe Price (TROW) which should benefit with a leading retail equity mutual fund franchise. In addition, we recently added Legg Mason (LM) to our Best Ideas list on the long side to capture the emerging trends on the institutional side of the industry which is experiencing inflow into fixed income and outflow in equities (see our Legg report here).

 

 

 

 

Jonathan Casteleyn, CFA, CMT 

203-562-6500 

jcasteleyn@hedgeye.com 

 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com