This note was originally published March 19, 2015 at 08:11 in Financials. Click here for more information on how you can become a subscriber to Hedgeye.
Investment Company Institute Mutual Fund Data and ETF Money Flow:
Domestic equity flows continue to be soft, coming in at a relatively low +$326 million this week and most importantly comping down a drastic 90% from trends in 2014. The first 10 weeks of 2015 have put up a marginal +$114 million weekly average inflow, this compares to the same two and a half month period in '14 which experienced a +$1.8 billion weekly subscription. This 93% decline year-over-year continues to relay the share losses for active funds to ETFs and also a rotation out of the U.S. stock market.
International equity fund flows are picking up some of the slack but are also comping down. In the most recent weekly survey, International stock funds put up a solid +$3.9 billion subscription, however even this week's decent number is only blending to a +$1.7 billion weekly average inflow year-to-date. The first 10 weeks in 2014 averaged a +$2.9 billion inflow, so while not as drastic a negative year-over-year comp, a -58% year-over-year decline for international equity funds is hard to get excited about. We continue to flag that shares of T. Rowe Price will bear the brunt of these weak equity trends and the stock continues on our Best Ideas list as a Short (or avoid - see our latest TROW research).
In the most recent 5 day period ending March 11th, total equity mutual funds put up net inflows of +$4.2 billion according to the Investment Company Institute, exceeding the year-to-date weekly average inflow of +$1.9 billion and the 2014 average inflow of +$620 million. The inflow was composed of international stock fund contributions of +$3.9 billion and domestic stock fund contributions of +$326 million. International equity funds have had positive flows in 48 of the last 52 weeks while domestic equity funds have had only 15 weeks of positive flows over the same time period.
Fixed income mutual funds put up inflows of +$1.3 billion, trailing their year-to-date weekly average inflow of +$3.0 billion but outpacing their 2014 average inflow of +$929 million. The inflow was composed of +$1.0 billion of contributions to taxable funds and +$278 million of contributions to tax-free or municipal bond funds. Munis have had a solid run with subscriptions in 51 of the last 52 weeks.
Equity ETFs lost -$190 million, trailing the year-to-date weekly average inflow of +$83 million and the 2014 weekly average inflow of +$3.2 billion. Fixed income ETFs gave up -$3.5 billion, trailing the year-to-date weekly average inflow of +$1.3 billion and the 2014 weekly average inflow of +$1.0 billion.
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 weekly average for 2014 and the weekly quarter-to-date average for 1Q 2015:
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), the weekly average for 2014, and the weekly quarter-to-date average for 1Q 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:
Sector and Asset Class Weekly ETF and Year-to-Date Results: Sector SPDR call-outs are similar to last week. The consumer discretionary XLY ETF experienced a +$579 million inflow (6% of its market cap) while the utilities XLU and long Treasury TLT saw outflows of -$438 (-6%) and -$664 (-9%) respectively.
The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a positive +$6.3 billion spread for the week (+$4.1 billion of total equity inflow net of the -$2.2 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 is +$1.1 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 -$15.5 billion (negative numbers imply more positive money flow to bonds for the week).
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:
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA