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[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008

Takeaway: ICI's recently published annual Factbook shows 2015 as the biggest annual inflow for money markets since 2008. FII printed record EPS in '08

Editor's Note: Below is a complimentary research note originally published June 2, 2016 by our Financials team. If you would like more info on how you can access our institutional research please email sales@hedgeye.com.

 

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Record earnings for a Financial company that is not an exchange? Survey says...only a handful...however Federated Investors (FII) is headed in that direction. With the diversification of the business into industry leading equity (and a few fixed income products) that are back stopping the challenged money fund business, the firm is a prime beneficiary of a "not too hot but not too cold" environment.

 

That said, the firm's core business is about to get another shot in the arm and the positioning is nicely paired off. If the Fed hikes rates into the back half of the year, the $260 billion in money fund assets at FII gets more profitable. Another +25 basis point increase takes operating income up $8 million annually or +$0.08 in annual EPS. If the economy slows and investors rush back to cash, then the company increases that $260 billion cash balance substantially. If the Fed hikes into a slowdown (drum roll please), then FII increases BOTH pricing and volume.

 

The company is a late cycle stock either way having put up record earnings in 2008 of $2.23 per share with a stock price that increased throughout both the Tech Wreck in 2000 and also the Financial crisis of 2007. The latest ICI annual FactBook outlines that 2015 was the biggest inflow into cash products (+$21 billion) since 2008.  

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - Cover chart normal

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - Cover II

 

Investment Company Institute Mutual Fund Data and ETF Money Flow:

International equity mutual funds missed a 3 week winning streak, with a -$1.0 billion outflow in the 5-day period ending May 25th. What has not been volatile however is domestic equity mutual funds which have been consistently soft, giving up -$5.2 billion this week alone with a -$3.0 billion weekly redemption thus far in '16. In fixed income, high yield and global mutual funds experienced -$321 million and -$1.8 billion in drawdowns while investment grade, other, and muni bonds brought in +$1.9 billion, +$2.2 billion, and +$1.5 billion respectively. Municipal bonds are leading the pack in fixed income, with the best start on record for the 21 weeks of 2016. ETF flows were fairly flat this week with equity funds bringing in +$280 million and bond funds gathering +$522 million. Finally, investors shored up a resounding +$14 billion in money funds/cash last week, the 3rd biggest weekly cash build of 2016.


[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI19

 

In the most recent 5-day period ending May 25th, total equity mutual funds put up net outflows of -$6.3 billion, trailing the year-to-date weekly average outflow of -$2.3 billion and the 2015 average outflow of -$1.6 billion.

 

Fixed income mutual funds put up net inflows of +$3.5 billion, outpacing the year-to-date weekly average inflow of +$2.4 billion and the 2015 average outflow of -$475 million.

 

Equity ETFs had net subscriptions of +$280 million, outpacing the year-to-date weekly average outflow of -$1.4 billion but trailing the 2015 average inflow of +$2.8 billion. Fixed income ETFs had net inflows of +$522 million, trailing the year-to-date weekly average inflow of +$1.5 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:

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI2

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI3

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI4

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI5

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - 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 | The Biggest Inflow Into Cash Products Since 2008 - ICI12

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI13

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI14

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI15

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - 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 | The Biggest Inflow Into Cash Products Since 2008 - ICI7

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI8

 

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 | The Biggest Inflow Into Cash Products Since 2008 - ICI17

 

[UNLOCKED] Fund Flow Survey | The Biggest Inflow Into Cash Products Since 2008 - ICI18



Net Results:

The net of total equity mutual fund and ETF flows against total bond mutual fund and ETF flows totaled a negative -$10.0 billion spread for the week (-$6.0 billion of total equity outflow net of the +$4.0 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 -$2.0 billion (negative numbers imply more positive money flow to bonds for the week) with a 52-week high of +$20.2 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 | The Biggest Inflow Into Cash Products Since 2008 - 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 | The Biggest Inflow Into Cash Products Since 2008 - ICI11 


Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets 6 8

 

Daily Market Data Dump: Wednesday - sector performance 6 8

 

Daily Market Data Dump: Wednesday - volume 6 8

 

Daily Market Data Dump: Wednesday - rates and spreads 6 8

 

Daily Market Data Dump: Wednesday - currencies 6 8


CHART OF THE DAY | Neck & Neck: Trump vs. Clinton

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here to learn more.

 

"... Settings aside something coming from left field (or an errant email server), this race is down to The Donald versus Hillary. As of this morning and as you can see in the Chart of the Day, the pollsters are basically showing it to be a statistical tie. To the chagrin of many, the Donald is in it to win it and has a real chance to do so. The next 5 months may have to be the grittiest and most determined of Hillary Clinton’s political life."

 

CHART OF THE DAY | Neck & Neck: Trump vs. Clinton - 06.08.16 EL Chart


Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

Cartoon of the Day: Sobriety Checkpoint Ahead

Cartoon of the Day: Sobriety Checkpoint Ahead - Yellen cart 06.07.2016

 

FYI: The Yellen Fed isn't "data dependent." It's S&P 500 dependent.


Drake: Contextualizing the Biggest Deceleration in Credit Growth Since 2010

 

In this brief discussion, Hedgeye U.S. Macro analyst Christian Drake analyzes the trend in consumer credit growth, which has been supporting consumption in the face of slowing income growth. 


Capital Brief: Clinton Clinches But Bernie's Still California Dreamin'

Takeaway: Hillary the Historic; Bernie's California Dream; Gary's Gains

Capital Brief: Clinton Clinches But Bernie's Still California Dreamin' - capital brief

 

Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email sales@hedgeye.com.

HILLARY THE HISTORIC

Capital Brief: Clinton Clinches But Bernie's Still California Dreamin' - hillary poster

 

Hillary Clinton has secured enough delegates to claim the Democratic presidential nomination and is poised to become the first female candidate to lead a major party to the White House in U.S. history.  A handful of super delegates pushed Clinton over the finish line of 2,383 ahead of a jampacked day full of primaries. Clinton will call for the  Democrats to unify behind her candidacy as primary season comes to an end today – and she and party leaders expect Bernie Sanders to follow suit.

 

To pad her lead, look for her to pick up a sizeable chunk of delegates in the six states voting today; her campaign hopes that being declared the presumptive nominee 24 hours before CA votes doesn’t suppress turnout and hand a victory to Sanders.

BERNIE’S CALIFORNIA DREAM

Capital Brief: Clinton Clinches But Bernie's Still California Dreamin' - sanders 22

 

Now that Clinton has been declared the presumptive Democratic nominee, this leaves Sanders with a hard decision to make – accept it or fight until the death. Sure, a win in CA would help him pitch his future to superdelegates - but to what end? Sanders’ case is broken - Clinton won a majority of the states, pledged delegates and super delegates - not to mention tens of  thousands of more votes. We think that despite Sanders’ reputation for obstinance, he’ll turn the corner once he realizes the only thing he can do between now and the convention in late July is hobble Clinton and her ability to get a head start on outmaneuvering Donald Trump, not to mention damage the party’s increasing chances at making gains in Congress.

 

No matter what happens in today’s primary, with Democrats adding 2.3 million voters to their ranks in the past four months, CA has become increasingly blue and will be an insurmountable challenge for Trump come November.

GARY’S GAINS

Libertarian presidential nominee Gary Johnson may not have solidified a serious position in the election race yet, but he’s sure on his way – he’s currently polling at 10 percent and gaining ground. Senator Ben Sasse (NE) – who was long considered as a potential third-party nominee – may be hopping on team Johnson. While Trump continues to double down on his hijinks and as Johnson begins to pick up big endorsements and earns media coverage - he’ll climb in the polls – something he needs to happen to be included in the general election debates.


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