ICI Fund Flow Survey | ~$250 Billion Dollar Divergence

Takeaway: Investors favored passive ETFs last week, continuing the trend that has brought 2015 ETF inflows to +101B versus fund redemptions of -$143 B

Investment Company Institute Mutual Fund Data and ETF Money Flow:

Investors pulled funds from almost all risk categories in the 5-day period ending November 18th. Total equity mutual funds lost -$4.9 billion, including another -$4.5 billion outflow from domestic stock funds. Fixed income mutual funds lost -$3.0 billion with investors continuing to flee the taxable bond category on fears of a rate hike. Meanwhile, investors favored passive ETFs, contributing +$1.5 billion and +$1.9 billion to equity and fixed income ETFs, respectively.

The chart below shows that the ongoing shift out of active domestic equity funds to passive U.S. equity ETFs year-to-date which has produced -$143.4 billion in outflows versus the +$101.1 billion that has been reinvested into ETFs over the same period. We recommend a short position in shares of T. Rowe Price as a way to express this ongoing shift (see our TROW reports). TROW's organic growth rate has been steadily dropping and what was once a double digit growth rate is moving to flat at best with our estimates calling for negatives growth through 2016. TROW funds still perform strongly however the shift out of the mutual fund structure is just too pervasive for the company to make the Street's still rosey expectations.


ICI Fund Flow Survey | ~$250 Billion Dollar Divergence - ICI19

ICI Fund Flow Survey | ~$250 Billion Dollar Divergence - TROW chart

 

In the most recent 5-day period ending November 18th, total equity mutual funds put up net outflows of -$4.9 billion, trailing the year-to-date weekly average outflow of -$773 million and the 2014 average inflow of +$620 million. The outflow was composed of international stock fund withdrawals of -$438 million and domestic stock fund withdrawals of -$4.5 billion. International equity funds have had positive flows in 44 of the last 52 weeks while domestic equity funds have had only 8 weeks of positive flows over the same time period.

 

Fixed income mutual funds put up net outflows of -$3.0 billion, trailing the year-to-date weekly average inflow of +$161 million and the 2014 average inflow of +$926 million. The outflow was composed of tax-free or municipal bond fund contributions of +$649 million and taxable bond fund withdrawals of -$3.6 billion.

 

Equity ETFs had net subscriptions of +$1.5 billion, trailing the year-to-date weekly average inflow of +$2.2 billion and the 2014 average inflow of +$3.2 billion. Fixed income ETFs had net inflows of +$1.8 billion, outpacing the year-to-date weekly average inflow of +$1.1 billion and the 2014 average inflow of +$1.0 billion.

ICI Fund Flow Survey | ~$250 Billion Dollar Divergence - ICI1

 

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:

 

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Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the materials XLB ETF ceded -4% or -$94 million to redemptions in the 5-day period ending November 18th.

 

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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.

 

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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 negative -$2.3 billion spread for the week (-$3.4 billion of total equity outflow net of the -$1.1 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 +$963 million (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 | ~$250 Billion Dollar Divergence - ICI11 



Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA