• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

Takeaway: Domestic equity flows continue to stand out. The category had its worst net outflow in 44 weeks with a -$7.3 billion redemption.

This note was originally published May 07, 2015 at 07:32 in Financials. For more information on how you can subscribe to our services click here.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

Domestic equity fund flows in 2015 continue to accelerate to the downside. In the 5-day period ending April 29th, investors withdrew a net -$7.3 billion from the asset class, the category's largest outflow in 44 weeks. As previously outlined, seasonality plays a substantial part of investor allocations and the first quarter since 2007 has been the most robust period annually with capital flow declining linearly into the fourth quarter (see our seasonality outline here). While this week's redemption is alarming, we are expecting continued soft sledding especially considering weaker equity market perform during the past month. We continue to highlight our highest conviction Short/Avoid idea T Rowe Price as most impacted by this trend.

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - z 44

In the most recent 5-day period ending April 29th, total equity mutual funds put up net outflows of -$3.2 billion, trailing the year-to-date weekly average inflow of +$988 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund contributions of +$4.1 billion and domestic stock fund withdrawals of -$7.3 billion. International equity funds have had positive flows in 48 of the last 52 weeks while domestic equity funds have had only 10 weeks of positive flows over the same time period.

Fixed income mutual funds put up net inflows of +$3.1 billion, outpacing the year-to-date weekly average inflow of +$2.3 billion and the 2014 average inflow of +$929 million. The inflow was composed of tax-free or municipal bond funds contributions of +$1.0 billion and taxable bond funds contributions of +$2.1 billion.

Equity ETFs had net subscriptions of +$3.7 billion, outpacing the year-to-date weekly average inflow of +$1.9 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net outflows of -$363 million, trailing the year-to-date weekly average inflow of +$1.5 billion and the 2014 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 year-to-date average for 2015:

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI2

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI3

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI4

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI5

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI6

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 year-to-date average for 2015. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI7

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI8

Sector and Asset Class Weekly ETF and Year-to-Date Results: With GDP coming in lower than expected and concerns over the Fed raising rates, investors made net redemptions from almost all sector SPDR ETFs. The long-treasury TLT and materials XLB experienced the highest percentage withdrawals. The TLT lost -3% or -$142 million. The XLB lost -4% or -$113 million.

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI9

Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$2.2 billion spread for the week (+$555 million of total equity inflow net of the +$2.8 billion inflow to 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.)

ICI Fund Flow Survey | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI10

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 | Slippery Slope in Active Equity Flows | Worst Week in Almost a Year - ICI11 

Jonathan Casteleyn, CFA, CMT 

203-562-6500 

jcasteleyn@hedgeye.com 

Joshua Steiner, CFA

203-562-6500

jsteiner@hedgeye.com