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Takeaway: Investors pulled capital from both equity and fixed income mutual funds, placing $18 billion into money funds.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

Amidst global growth concerns, rising volatility, and sliding markets, net flows into risk assets were negative on both sides of the aisle in the 5 days ending December 10th according to the latest ICI Fund Flow Survey. Total bond funds lost $3.3 billion last week with equity funds also losing an equivalent $3.2 billion. Within the equity fund redemption was a $5.0 billion draw down in domestic stock funds, which makes it 30 of the past 33 weeks with outflow now totaling over $71 billion in domestic stock funds. This data continues to support our cautious stance on shares of T Rowe Price (TROW) and Janus Capital (JNS), especially into the seasonally weakest fourth quarter prints in January (see our JNS and TROW research here). Conversely, investors poured $18 billion into money market funds last week (which have now had $97 billion of inflows in the past 8 weeks), which supports our Best Long Idea for 2015, Federated Investors (FII) (see our FII research here). 

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In the most recent 5 day period ending December 10th, total equity mutual funds put up net outflows of $3.3 billion according to the Investment Company Institute. The outflow was composed of domestic stock fund withdrawals of $5.0 billion versus the $1.7 billion subscription into international stock funds. The international and domestic equity categories continue to be polarized with international stock funds having inflows in 47 of the past 48 weeks, versus domestic trends which have been very soft with inflow in just 16 of the past 48 weeks. The running year-to-date weekly average for all equity fund flow continues to decline and now settles at a $850 million inflow, well below the $3.1 billion weekly average inflow from 2013. 

Fixed income mutual funds put up outflows of $3.3 billion with $4.4 billion of outflows in taxable funds being saved by $1.1 billion of inflows in tax-free funds.  Munis have had a solid run with subscriptions in 47 of the past 48 weeks. The 2014 weekly average for fixed income mutual funds now stands at a $1.0 billion weekly inflow, an improvement from 2013's weekly average outflow of $1.3 billion, but still a pittance of the weekly average of +$5.8 billion in 2012 (our view of the blow off top in bond fund inflow). 

Equity ETF results were resilient during the most recent 5 days, offsetting the outflow from equity mutual funds.  Equity ETFs put up a $3.8 billion inflow which is above the 2014 weekly average of a $2.7 billion inflow. Fixed income ETFs however put up a $126 million outflow, below the year-to-date average of $1.0 billion inflow.

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.   

Most Recent 12 Week Flow in Millions by Mutual Fund Product: Chart data is the most recent 12 weeks from the ICI mutual fund survey and includes the running weekly year-to-date average for 2014 and the weekly quarter-to-date average for 4Q 2014:

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Most Recent 12 Week Flow Within Equity and Fixed Income Exchange Traded Funds: Chart data is the most recent 12 weeks from Bloomberg's ETF database (matched to the Wednesday to Wednesday reporting format of the ICI) and the running weekly year-to-date average for 2014 and the weekly quarter-to-date average for 4Q 2014. The third table are the results of the weekly flows into and out of the major market and sector SPDRs:

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Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the the XLB materials ETF experienced the largest flow on a percentage basis (+7% or +$179 million) with the XLY Consumer discretionary following at a +4% (+$302 million) inflow.

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Net Results:

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $4.0 billion spread for the week ($563 million of total equity inflow versus the $3.4 billion outflow from 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 $2.2 billion (more positive money flow to equities), with a 52 week high of $17.7 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). 

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Exposures: The weekly data herein is important for the public asset managers with trends in mutual funds and ETFs impacting the companies with the following estimated revenue impact:

 

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Jonathan Casteleyn, CFA, CMT 

 

 

Joshua Steiner, CFA