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Takeaway: U.S. stock funds put up their 12th consecutive week of outflow with bond fund inflows holding steady

Investment Company Institute Mutual Fund Data and ETF Money Flow:

In the most recent 5 day period, the combined equity mutual fund complex had a moderate outflow with $2.2 billion being redeemed from the category. The culprit was U.S. stock funds which experienced a $3.9 billion outflow, its 12th consecutive week of redemption which was slightly softened by a $1.7 billion inflow into global equity funds. Aggregate bond funds conversely, including both taxable and tax free products, netted another $2.4 billion in new investor subscriptions making it 22 of 23 weeks of taxable bond inflows with 25 of 26 weeks of positive subscriptions into tax-free or muni bonds. We are growing increasingly cautious on the trends in U.S. equity funds with accelerating market share gains by passive ETFs and also entering the seasonally slower Summer months and the volatile Fall period. The U.S. stock fund proxies are T Rowe Price (TROW) and Janus Capital (JNS).

Total equity mutual funds put up a moderate outflow in the most recent 5 day period ending July 16th with $2.2 billion coming out of the all stock category as reported by the Investment Company Institute. The composition of the $2.2 billion redemption continued to be weighted towards U.S. stock funds with $3.9 billion coming out of domestic equity funds which was offset by a $1.7 billion subscription into international equity products. This drawdown in domestic equity funds has become an intermediate term trend with now the 12th consecutive week of outflow in the category. The running year-to-date weekly average for equity fund flow is now a $1.7 billion inflow, which is now below the $3.0 billion weekly average inflow from 2013. 

Fixed income mutual fund flows had another decent week of production with the aggregate $2.4 billion that came into the asset class besting the 2014 running year-to-date average inflow of $2.2 billion. The inflow into taxable products of $1.9 billion made it 22 of 23 weeks with positive flow for the category. Municipal or tax-free bond funds put up a $497 million inflow making it 26 of 27 weeks with positive subscriptions. The 2014 weekly average for fixed income mutual funds now stands at a $2.2 billion weekly inflow, an 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). 

ETF results were solid during the week with inflows into both equity funds and fixed income products. Equity ETFs put up a $5.0 billion subscription, making it 7 of 8 weeks with significant inflows, while fixed income ETFs put up a decent $1.2 billion inflow. The 2014 weekly averages are now a $1.8 billion weekly inflow for equity ETFs and a $839 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 negative $914 million spread for the week ($2.8 billion of total equity inflow versus the $3.7 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 $5.3 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.   

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 1

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

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 2

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 3

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 4

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 5

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 6

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

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 7

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 8

Net Results:

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a negative $914 million spread for the week ($2.8 billion of total equity inflow versus the $3.7 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 $5.3 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). 

ICI Fund Flow Survey - U.S. Equities Over the Waterfall...Bond Funds Bolstered - ICI chart 9 

Jonathan Casteleyn, CFA, CMT 

 

 

Joshua Steiner, CFA