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ICI Fund Flow Survey - Heavy Inflow to Passive Funds

Takeaway: Investors have favored passive over active this year. Passive equity put up its largest inflow in the 52-week period.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

 

With a $25.3 billion inflow to the SPY, we again highlight investors' favoring passive over active this year, especially in equity.  In the first chart below, the spread between cumulative flows in equity ETFs versus equity mutual funds drastically widened in the five days ending December 22nd.  Equity ETFs have taken in $157 billion in 2014 versus equity mutual funds' $32.7 billion inflow.  As outlined in our sector exposure table at the bottom of this note, BlackRock (BLK) and Invesco (IVZ) house the most substantial ETF exposure on a revenue basis at 44% and 19% respectively. Both stocks year-to-date have outflanked the S&P asset management index on a total return basis with BLK returning +15.4% and IVZ up +11.3%. The asset management group is up 9.4% thus far in 2014.

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 19

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 20

 

In the most recent 5 day period ending December 22nd, total equity mutual funds put up net outflows of $2.4 billion according to the Investment Company Institute. The outflow was composed of domestic stock fund withdrawals of $1.1 billion and international stock fund withdrawals of $1.4 billion. The international and domestic equity categories have been polarized this year with international stock funds having inflows in 48 of the past 51 weeks, versus domestic trends which have been very soft with inflow in just 16 of the past 51 weeks. The running year-to-date weekly average for all equity fund flow continues to decline and now settles at a $641 million inflow, well below the $3.1 billion weekly average inflow from 2013. 

 

Fixed income mutual funds put up outflows of $3.0 billion with $3.3 billion of outflows from taxable funds and $329 million of inflows into tax-free funds.  Munis have had a solid year with subscriptions in 49 of the past 51 weeks. The 2014 weekly average for fixed income mutual funds now stands at a $729 million 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). 

 

ETF results were markedly strong; equity ETFs put up their largest inflow in the past 52 weeks: $29.3 billion, well above the the 2014 weekly average of a $3.1 billion inflow. Fixed income ETFs, put up a $2.0 billion inflow, above the year-to-date average of a $1.1 billion inflow.

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 1 2

 

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:

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 2

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 3

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 4

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 5

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 6

 

 

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:

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 7

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 8

 

Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the SPY took the majority of inflows with $25.3 billion (13%) in net contributions.  The Energy XLE experienced the second biggest gain, taking in $1.4 billion (13%).

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 9

 

 

Net Results:

The net of total equity mutual fund and ETF trends against total bond mutual fund and ETF flows totaled a positive $27.9 billion spread for the week ($26.9 billion of total equity inflow versus the $990 million 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 $2.1 billion (more positive money flow to equities), with a 52 week high of $27.9 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 - Heavy Inflow to Passive Funds - ICI 10 2

 

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:

 

ICI Fund Flow Survey - Heavy Inflow to Passive Funds - ICI 11 

 

 

 

Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA

 

 


Cartoon of the Day: The Drop

Cartoon of the Day: The Drop - Ball drop cartoon 12.31.2014

Oil is getting tagged (yet again) into year end. WTI down over -2% to under $53. That's six straight down weeks ... a pervasive #deflation signal.


Is UA the Next NKE?

On December 18, the Hedgeye Retail Team hosted a Black Book call on the athletic apparel and footwear space. Sector Head Brian McGough explains how his opinion of athlete endorsements has evolved (which is particularly relevant given $UA's recent signing of Andy Murray) and reveals what Under Armour needs in order to become the next Nike. 

 

 

This institutional conference call focused on Athletic footwear and apparel space. Specific names included Nike (NKE), Adidas (ADDYY), UnderArmour (UA), Foot Locker (FL), Hibbett (HIBB), Dick's Sporting Goods (DKS), and Finish Line (FINL) - which collectively offer up a good mix of LONGS and SHORTS.

 

 


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Pending Home Sales | November Acceleration & Easing Comps Pave Way for Improving 2015

Takeaway: Pending Home Sales grew 80 bps on a month-over-month basis, which brings the year-over-year growth rate to +4.1% vs. +2.1% last month.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.

 

Pending Home Sales | November Acceleration & Easing Comps Pave Way for Improving 2015 - Compendium 123114

 

Today's Focus: November Pending Home Sales Index

The National Association of Realtors (NAR) today released its Pending Home Sales Index for the month of November.

 

Pending Home Sales increased +0.8% MoM (vs. -1.2% prior), accelerating to +4.1% on a year-over-year basis.  Home Sales increased across all regions with YoY growth accelerating across each as well. Compares continue to ease from here. 

 

EHS Acceleration?  PHS is a leading indicator for EHS with an R-square of 0.86+ between the two series (lagged 1-month) over the history of the data.  Thus, the EHS release is typically uneventful as both the direction and magnitude of change in existing sales is well-telegraphed by the Pending Home Sales report a month earlier. 

 

However, we’ve seen rising volatility/divergence between EHS & PHS on a month-to-month basis since the series troughed in March.  Summarily, and as the 1st chart below illustrates, EHS began to diverge from the more modest gains in PHS in September and October. We posited that unless PHS saw a significant positive revision or showed material acceleration, reported gains in EHS would likely retreat.    

We saw this materialize in November with reported EHS dropping -6.1% sequentially, falling below the gain in PHS and taking the cumulative gain from trough to +7.4%. Now the setup has essentially reversed with the balance of risk for EHS to the upside with cumulative growth in PHS at a premium to EHS and showing incremental strength in November.   

 

RoC Improvement..Early Evidence:  A core (albeit simple) underpinning to our positive view on housing for 2015 is the progressively easier demand comps as we traverse the peak negative impact of rates/weather/credit tightening into 2H15.  We are seeing early evidence of 2nd derivative improvement with Pending Home Sales rising +4.1% YoY in November, marking a 3rd straight month of positive growth (following 11-months of neg. growth) and accelerating 200bps vs. the +2.1% growth reported last month.   In the intermediate term, demand compares continue to ease into February with Dec-Feb comps of -8%, -9%, -10%, respectively.  

 

 

Pending Home Sales | November Acceleration & Easing Comps Pave Way for Improving 2015 - EHS vs PHS 

 

Pending Home Sales | November Acceleration & Easing Comps Pave Way for Improving 2015 - PHS Index   YoY TTM 

 

Pending Home Sales | November Acceleration & Easing Comps Pave Way for Improving 2015 - PHS LT w Summary Stats 

 

Pending Home Sales | November Acceleration & Easing Comps Pave Way for Improving 2015 - PHS Regional YoY  

 

  

About Pending Home Sales:

The Pending Home Sales Index is a monthly data release from the National Association of Realtors (NAR) and is considered a leading indicator for housing activity in the US. It is a leading indicator for Existing Home Sales, not New Home Sales. A pending home sale reflects the signing of a contract, but not the closing of the transaction, which occurs 1-2 months later. The NAR uses data from the MLS and large brokers to calculate the Pending Home Sales index. An index value of 100 corresponds to the average level of activity during 2001.

 

Frequency:

The NAR Pending Home Sales index is released between the 25th and the 31st of each month and covers data from the prior month.

 

 

Joshua Steiner, CFA

 

Christian B. Drake


PODCAST| Must-Listen: McCullough Circles the Macro Market Globe In 15 Minutes

In this complimentary New Year’s Eve podcast of Hedgeye’s Morning Macro Call, CEO Keith McCullough discusses the most important macro data on his screen and answers key questions from institutional subscribers.

 

 

Keith highlights the desperate scene in Europe as Mario Draghi and Peter Praet (chief economist for ECB) effectively beg for quantitative easing. He also discusses the effects of Quad4 #deflation and why gold will not go up until the USD retreats.


Keith's Macro Notebook 12/31: China | Oil | VIX

 

Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.


Daily Trading Ranges

20 Proprietary Risk Ranges

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