[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds

Takeaway: Last week, investors sought safety in bonds, contributing a net $12.9 billion more to fixed income than equities

 

Editor's Note: This is a complimentary research note which was originally published January 14, 2016 by our Financials team. If you would like more info on how you can access our institutional research please email sales@hedgeye.com.

 

Investment Company Institute Mutual Fund Data and ETF Money Flow:

In the first week of 2016, investors reacted to the market turmoil by favoring bonds over stocks as measured by the -$12.9 billion spread between total equity flows and total bond flows (incorporating both mutual funds and ETFs). Positive numbers imply greater money flow to stocks with negative numbers imply greater money flow to bonds. With volatility on the rise in early 2016, we expect the aversion to stocks to continue.

 

Importantly, active domestic equity funds continued their losing streak, which we define as a string of outflows unbroken by four consecutive weeks of inflows. The following chart shows that domestic equity has been in outflow for 45 consecutive weeks with the current streak running at the fastest pace on record with a redemption average of -$4.0 billion per week. With the domestic equity exodus showing no sign of stopping, we continue to recommend a short position in shares of T. Rowe Price (see our TROW reports).


[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI19

 

In the most recent 5-day period ending January 6th, total equity mutual funds put up net outflows of -$2.4 billion, trailing the 2015 average outflow of -$1.5 billion. The outflow was composed of international stock fund contributions of +$1.6 billion and domestic stock fund withdrawals of -$4.0 billion. International equity funds have had positive flows in 41 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 inflows of +$67 million, outpacing the 2015 average outflow of -$462 million. The inflow was composed of tax-free or municipal bond funds contributions of +$1.4 billion and taxable bond funds withdrawals of -$1.3 billion.

 

Equity ETFs had net redemptions of -$9.1 billion, trailing the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$1.3 billion, surpassing the 2015 average inflow of +$1.0 billion.

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - 1 20 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 2015 and the weekly year-to-date average for 2016:

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI2

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI3

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI4

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI5

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI6



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.

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI12

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI13

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI14

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI15

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI16

 

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 2015, and the weekly year-to-date average for 2016. In the third table are the results of the weekly flows into and out of the major market and sector SPDRs:

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI7

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI8

 

Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, investors shunned technology stocks, redeeming -$506 million or -4% from the technology XLK ETF.

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - 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.

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI17

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI18

 

Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$12.9 billion spread for the week (-$11.5 billion of total equity outflow net of the +$1.4 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 +$691 million (more positive money flow to equities) with a 52-week high of +$20.5 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.)

  

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - 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:

 

[UNLOCKED] Fund Flow Survey | Gentlemen Prefer Bonds - ICI11

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more