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Fund Flows, Refreshed [Equity + Fixed Income]

Takeaway: This past week saw a rebound in both equity and fixed income flows, albeit to just running year-to-date averages.

This note was originally published May 01, 2014 at 09:42 in Financials by Hedgeye's Financials team.

 

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

Fund Flows, Refreshed [Equity + Fixed Income] - eye

 

In the most recent 5 day period, absolute money flow into both equity and fixed income mutual funds rebounded week-to-week to near the year-to-date averages, reversing last week's negative trends:

 

Total equity mutual fund flow accelerated sequentially week-to-week, producing a tally only slightly below the 2014 year-to-date weekly average. The $3.5 billion that came into all equity mutual funds during the most recent 5 day period ending April 23rd was split between a $1.4 billion inflow into U.S. equity funds and an improved $2.1 billion inflow into international stock funds. This higher demand for foreign equity products has been consistent over the past two years with international stock fund inflow having averaged $2.9 billion per week this year and $2.6 billion per week last year in 2013 with domestic fund products averaging an inflow of just $1.3 billion thus far in '14 and a $451 million inflow last year in comparison. The 2014 running weekly average inflow for all equity mutual funds is now $4.1 billion, an improvement from the $3.0 billion weekly average inflow from 2013. 

 

Fixed income mutual fund flow also accelerated substantially on a w/w basis, reversing last week's trend lines in the product graphs below, which had displayed decreasing momentum for bond funds versus equity funds. For the week ending April 23rd, $2.3 billion flowed into all fixed income funds, as opposed to last week's paltry $659 million inflow. The improvement in bond fund inflow this week is the result of $1.7 billion that flowed into taxable products and $531 million that flowed into tax-free or municipal products. The inflow into taxable products this week was the 11th consecutive week of positive flow and the inflow into municipal or tax-free products was the 15th consecutive week of positive subscriptions. The 2014 weekly average for fixed income mutual funds now stands at a $1.9 billion weekly inflow, a vast improvement from 2013's weekly average outflow of $1.5 billion, but still 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 experienced dramatically positive w/w changes in trends, with a notable week subscription for Bond ETFs, which experienced an inflow of $1.2 billion, in contrast to the previous week's $204 million inflow. Stock ETFs left last week's $2.2 billion outflow far behind, netting $193 million in new inflows last week. The 2014 weekly averages are now a $973 million weekly inflow for equity ETFs and a $931 million 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 $276 million spread for the week ($3.7 billion of total equity inflow versus the $3.4 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $5.4 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.5 billion (negative numbers imply more positive money flow to bonds for the week). 

 

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.   

 

 

Fund Flows, Refreshed [Equity + Fixed Income] - fundf

 

 

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

 

 

Fund Flows, Refreshed [Equity + Fixed Income] - 2

 

Fund Flows, Refreshed [Equity + Fixed Income] - 3

 

Fund Flows, Refreshed [Equity + Fixed Income] - 4

 

Fund Flows, Refreshed [Equity + Fixed Income] - 5

 

Fund Flows, Refreshed [Equity + Fixed Income] - 6

 

 

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

  

 

Fund Flows, Refreshed [Equity + Fixed Income] - 7

 

Fund Flows, Refreshed [Equity + Fixed Income] - 8

 

 

Net Results:

 

 

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $276 million spread for the week ($3.7 billion of total equity inflow versus the $3.4 billion inflow within fixed income; positive numbers imply greater money flow to stocks; negative numbers imply greater money flow to bonds). The 52 week moving average has been $5.4 billion (more positive money flow to equities), with a 52 week high of $31.0 billion (more positive money flow to equities) and a 52 week low of -$37.5 billion (negative numbers imply more positive money flow to bonds for the week).

 

 

Fund Flows, Refreshed [Equity + Fixed Income] - 9 

 

 

 

Jonathan Casteleyn, CFA, CMT 

203-562-6500 

jcasteleyn@hedgeye.com 

 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com

 


European Banking Monitor: Credit Spreads Tighten Across Europe

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

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European Financial CDS - All European swaps, with the exception of the Greek banks and three Swedish banks, tightened over the past week. Most of the 31 swaps that tightened did so by a notable amount. On average, French swaps tightened by 7 bps, German by 8 bps, Italian  by 9 bps, Portuguese by 14 bps, Scottish by 16 bps, Spanish by 9 bps, and UK by 6 bps. In contrast to the past couple of weeks, Greek banks widened considerably w/w, by an average of 48 bps. The widening of Swedish banks was nominal, with three banks widening by 1 bps each, and the fourth tightening by 1 bps. 

 

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 1 financials cds

 

Sovereign CDS – Sovereign swaps mostly tightened over last week. Italian sovereign swaps tightened by -3.9% (-4 bps to 111 ) and American sovereign swaps widened by 0.7%.

 

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 2 sovereign cds

 

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 3 sovereign cds

 

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 4 sovereign cds

 

Euribor-OIS Spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread widened by 2 bps to 16 bps.

 

European Banking Monitor: Credit Spreads Tighten Across Europe - chart 5 euribor ois spread

 

Matthew Hedrick

Associate

 

Ben Ryan

Analyst


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Takeaway: Ahead of Target CEO Gregg Steinhafel's ouster, Hedgeye retail analyst Brian McGough explained why he doesn't like shares of beleaguered TGT.

FLASHBACK: McGough 5 Slides Explaining Why We're Short Target | $TGT - TARGET cartoon

 

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  • “'Today we are announcing that, after extensive discussions, the board and Gregg Steinhafel have decided that now is the right time for new leadership at Target. Effective immediately, gregg [sic] will step down from his positions as Chairman of the Target board of directors, president and CEO.'"

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FIRST FOUR DAYS OF MAY IN MACAU

While a very short period of time of only 4 days, daily table revenues (DTR) averaged a strong HK$1,349m (+12% YoY) due to the start of Golden Week.  We continue to project full month GGR growth of 20%, which we believe would be a positive relative to current consensus expectations of low to mid-teens.

 

Market shares are irrelevant at this point but they can be seen in the table below.  Note that we don’t have table shares for April yet, only GGR share which is not exactly comparable.

 

FIRST FOUR DAYS OF MAY IN MACAU - macau1

 

FIRST FOUR DAYS OF MAY IN MACAU - macau2



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