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Takeaway: In continued risk aversion, investors are piling into tax-free municipal bonds.

Investment Company Institute Mutual Fund Data and ETF Money Flow:

In the 5-day period ending January 27th, investors returned to making contributions to equity ETFs with a +$2.0 billion net subscription and international equity funds also saw some interest with a +$1.3 billion inflow. However, the exodus from domestic equity funds continued with a -$6.2 billion outflow last week, negating total net inflows to the total equity category. Additionally, taxable bond funds continued to give up AUM, losing -$1.8 billion to withdrawals. The category has been taking it on the chin recently and has had only 23 weeks of positive inflows in the last 52 weeks. However, investor interest continues in tax-free bonds with investors making a positive contribution of +$856 million. Weekly average contributions in tax-free bonds are up over +200% in 2016, with a mean weekly contribution of +$1.1 billion thus far in the New Year versus the 2015 weekly average of +$314 million. Money funds saw a +$14 billion inflow during the week as investors also shored up cash.


ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI1

 

In the most recent 5-day period ending January 27th, total equity mutual funds put up net outflows of -$4.9 billion, trailing the year-to-date weekly average outflow of -$3.2 billion and the 2015 average outflow of -$1.5 billion. The outflow was composed of international stock fund contributions of +$1.3 billion and domestic stock fund withdrawals of -$6.2 billion. International equity funds have had positive flows in 41 of the last 52 weeks while domestic equity funds have had only 6 weeks of positive flows over the same time period.

 

Fixed income mutual funds put up net outflows of -$917 million, trailing the year-to-date weekly average outflow of -$834 million and the 2015 average outflow of -$463 million. The outflow was composed of tax-free or municipal bond funds contributions of +$856 million and taxable bond funds withdrawals of -$1.8 billion.

 

Equity ETFs had net subscriptions of +$2.0 billion, outpacing the year-to-date weekly average outflow of -$4.8 billion but trailing the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$5.3 billion, outpacing the year-to-date weekly average inflow of +$2.7 billion and the 2015 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 2015 and the weekly year-to-date average for 2016:

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI2

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI3

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI4

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI5

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - 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.

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI12

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI13

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI14

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI15

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - 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:

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI7

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI8



Sector and Asset Class Weekly ETF and Year-to-Date Results: In sector SPDR callouts, the defensive utilities XLU and long treasuries TLT ETFs experienced the largest percentage inflows last week of +3% or +$180 million to the XLU and +3% or +$226 million to the TLT.

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - 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 | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI17

 

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$7.3 billion spread for the week (-$2.9 billion of total equity outflow net of the +$4.4 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 +$437 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.)

ICI Fund Flow Survey | Tax-Free Municipal Flows Up Over +200% to Start '16 - 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 | Tax-Free Municipal Flows Up Over +200% to Start '16 - ICI11 



Jonathan Casteleyn, CFA, CMT 

 

 

 

Joshua Steiner, CFA