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Takeaway: Amongst market volatility, investors favored passive ETFs and cash in the 5-day period ending September 30.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

As volatility picked up across asset class in the 5-day period ending September 30, most risk assets shed funds. Total equity products (mutual funds and ETFs) lost -$3.5 billion and total bond products shed -$8.1 billion. Within equity, domestic equity mutual funds finished the third quarter with a bang, losing -$7.2 billion. That was the second largest weekly outflow all quarter. Meanwhile, investors clearly favored the safety of cash, making a +$8 billion contribution to money funds. Total money funds, according to ICI, brought in +$67 billion in 3Q15, after draw downs of -$18 billion in 2Q and -$92 billion in 1Q15. 

With volatility continuing to drive investors to safety and out of risk assets, the current market environment supports our Long recommendation on money fund manager Federated Investors (see FII report) and our Short recommendations on equity managers Janus Capital and T. Rowe Price (See JNS and TROW reports).


ICI Fund Flow Survey | Safety First - ICI1


In the most recent 5-day period ending September 30th, total equity mutual funds put up net outflows of -$6.3 billion, trailing the year-to-date weekly average outflow of -$391 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund contributions of +$891 million and domestic stock fund withdrawals of -$7.2 billion. International equity funds have had positive flows in 46 of the last 52 weeks while domestic equity funds have had only 11 weeks of positive flows over the same time period.


Fixed income mutual funds put up net outflows of -$8.4 billion, trailing the year-to-date weekly average inflow of +$128 million and the 2014 average inflow of +$926 million. The outflow was composed of tax-free or municipal bond funds withdrawals of -$588 million and taxable bond funds withdrawals of -$7.8 billion.


Equity ETFs had net subscriptions of +$2.8 billion, outpacing the year-to-date weekly average inflow of +$1.9 billion but trailing the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net inflows of +$328 million, trailing the year-to-date weekly average inflow of +$1.1 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:


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Cumulative Annual Flow in Millions by Mutual Fund Product: Chart data is the cumulative fund flow from the ICI mutual fund survey for each year starting with 2008.

 

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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), 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 | Safety First - ICI7


ICI Fund Flow Survey | Safety First - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the healthcare XLV lost -$831 million or -6% last week as the sector came under political scrutiny for drug price increases. Meanwhile, the consumer staples XLP saw the biggest percentage inflow of +7% or +$507 million for the week.


ICI Fund Flow Survey | Safety First - ICI9



Cumulative Annual Flow in Millions within Equity and Fixed Income Exchange Traded Funds: Chart data is the cumulative fund flow from Bloomberg's ETF database for each year starting with 2013.


ICI Fund Flow Survey | Safety First - ICI17


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Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a positive +$4.6 billion spread for the week (-$3.5 billion of total equity outflow net of the -$8.1 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 +$1.5 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 -$19.0 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:


ICI Fund Flow Survey | Safety First - ICI11 



Jonathan Casteleyn, CFA, CMT 

 

 


Joshua Steiner, CFA