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Lipper Fund Flows: Another Miss For Money Markets With $20.2 Billion Exit

By Patrick Keon The S&P 500 Index (+0.41%) and the Dow Jones Industrial Average (+0.20%) both recorded gains for the flows week. The overall positive performance by the indices for the week marked a significant turnaround from the performance at the start of the week; both indices retreated over 2.5% during the first two trading days. Then the markets rallied over the second half of the week: the S&P 500 was up 3.0% and the Dow appreciated 2.8%. Again, news and speculation about whether the Federal Reserve will raise interest rates in December dominated the market news during the week. There was sufficient economic data and public signals from individual Fed presidents for the market to take the view that the rate rise in December is becoming a foregone conclusion. Economic data released the prior week showed continued strength in the jobs market, with new unemployment claims remaining low and inflation starting to percolate as U.S. consumer prices rose in October. Both of these areas had been previously pointed to by Fed Chair Janet Yellen as key determinants in the Fed’s decision-making process. Four Fed presidents (New York’s William Dudley, St. Louis’s James Bullard, Richmond’s Jeffrey Lacker, and Cleveland’s Loretta Mester) publicly expressed during the week that December is the right time to start lifting rates. The near certainty of a rate increase was taken as a positive by week’s end and was seen as a strong sign the U.S. economy is continuing to improve. This past week’s net outflows for money market funds (-$20.2 billion) pushed their overall outflows for the year so far to $23.2 billion. The week’s activity in the group was varied; funds in Lipper’s Money Market Funds and Institutional Money Market Funds classifications had significant net outflows of $14.6 billion and $13.8 billion, respectively. Meanwhile, Institutional U.S. Government Money Market Funds and Institutional U.S. Treasury Money Market Funds took in $4.5 billion and $3.0 billion of net new money. Equity mutual funds (-$3.3 billion) were responsible for all the net outflows from the equity fund macro-group, while equity ETFs had positive flows of just over $1 billion. Mutual funds saw net outflows from both domestic equity (-$2.6 billion) and nondomestic equity (-$700 million) funds. Among ETFs, the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) (+$693 million) and the United States Oil ETF (NYSEARCA: USO ) (+$373 million) experienced the two largest net inflows for the week. Similar to the equity funds, mutual funds were responsible for all the net outflows for taxable bond funds (-$820 million), while taxable bond ETFs saw their coffers grow $1.2 billion. Investors ran away from lower-quality mutual funds; Lipper’s High Yield Funds and Loan Participation Funds classifications had $1.0 billion and $234 million of net outflows for the week. The Core Bond Funds category paced the ETFs, with the group taking in over $930 million of net new money. Municipal bond mutual funds had net inflows of $263 million-for their seventh consecutive week of positive flows. Funds in Lipper’s national municipal bond fund classifications (+$251 million) accounted for the lion’s share of these positive flows.

October ETF Asset-Flow Roundup

After a tumultuous Q3, it might be wise to look at how the $2.1 billion ETF industry performed in the first month of fourth-quarter 2015. Overall, the month came as a breather after a throttling third quarter. The major U.S. indexes finished October on a positive note on a stabilizing global economy, the promise of further monetary stimuli from the global superpowers and a dovish Fed. Let’s take a look at the corners that were the hot favorites of investors and those that were casted out. Our study concludes that income and international ETFs were the star performers in terms of asset gathering as these saw maximum inflows while the broader U.S. market was the laggard. Gainers High-Yield Bonds – SPDR Barclays High Yield Bond (NYSEARCA: JNK ) Hopes of a delayed Fed rate hike pushed bond yields down in October and investors piled up cash in high-yield bond ETFs, both for income and growth. Moreover, junk bonds are well attached with the energy sector. As energy securities cover about 16% of the high-yield bond market, a recovery in oil prices bode well for high-yield ETFs in the month. Thanks to this trend, JNK, a popular junk bond ETF, was at the helm, having added over $2.6 billion in assets in the month. This propelled its AUM to $11.9 billion. Two other junk-bond ETFs, iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA: LQD ) and iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA: HYG ) also added about $2.52 billion and $2.23 billion, respectively, to their asset base and took the second and third spots. LQD and HYG ended the month with about $24.7 billion and $15.4 billion, respectively. Nasdaq – PowerShares QQQ (NASDAQ: QQQ ) Technology earnings have turned out pretty well this season with the numbers not only bettering pre-season expectations, but also outperforming the sector’s performance in other recent quarters. This boosted investors’ lure for the tech-heavy Nasdaq ETF QQQ which took the fourth rank. QQQ hauled in about $1.73 billion to exit the month with $37 billion in assets. Europe – iShares MSCI EMU ETF (NYSEARCA: EZU ) The European markets roared back in the month on the European Central Bank (ECB) president Mario Draghi’s reassurance of a more intensified and protracted QE measure, if need be. Sensing further easing potential, STOXX 600 added about 8% in October underscoring the largest monthly rally in six years. Investors also poured in $1.56 billion, the fifth largest in the list, to be part of this rally. EZU has now amassed over $13 billion. Losers U.S. – SPDR S&P 500 ETF Trust (NYSEARCA: SPY ) Despite the Fed-induced bounce, U.S. stocks – small and large – could not rope in investors’ attention. While global growth fears weighed on the S&P 500-based large-cap ETF SPY, a volley of weak U.S. economic data came in the way of Russell 2000-based small-cap ETF iShares Russell 2000 (NYSEARCA: IWM ). After all, U.S. economic growth tallied 1.5 % in Q3, falling short of expectation of 1.6%. The products, SPY and IWM, witnessed an outflow of about $827 million and $632 million, respectively. Short-Term U.S. Bonds – iShares 3-7 Year Treasury Bond ETF (NYSEARCA: IEI ) Though the bet over a faster rate hike eased in October, the investing world has started to prepare for a Fed lift-off by this year-end or early next year. Since short-term bonds are expected to underperform the most on an expected rise in benchmark interest rates, short-term bond ETFs fell out of investors’ favor. Moreover, short-term bond ETFs sport meager yields – another reason for the disfavor to yield-starved investors. Hence, IEI had to sacrifice about $511 million in net assets while iShares Short Treasury Bond ETF (NYSEARCA: SHV ) surrendered about $507 million. Biotechnology – iShares Nasdaq Biotechnology (NASDAQ: IBB ) Nagging concerns over the biotech space regarding the over pricing of life-saving drugs shifted this hot and soaring sector from its lofty position a bit. Though the downing trend is reversing lately, October was an off month for the biotech sector. The biotech fund IBB saw a net exodus of about $497 million in assets. Original Post

Lipper U.S. Fund Flows: Gains For All 4 Fund Groups

By Patrick Keon Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) had aggregate net inflows of $14.0 billion for the fund-flows week ended Wednesday, October 14. This activity marked the second consecutive week of overall positive flows; the groups took in $11.8 billion of net new money the prior week. The wealth was spread out this past week, with all four fund macro-groups experiencing positive net flows: money market funds (+$7.9 billion) led the pack, followed by taxable bond funds (+$3.1 billion) and equity funds (+$2.5 billion), while municipal bond funds contributed $521 million. The downturn at the end of the week was triggered by weak economic data from both domestic and foreign sources. Reports out of China again raised global growth concerns. China’s economic growth for Q3 2015 was forecasted to be 6.8%, the lowest level since 2009, giving investors concerns as to whether the slump in the world’s second largest economy is worse than originally thought. On the home front, corporate earnings and a gloomy picture of U.S. growth weighed on the markets. Wal-Mart (NYSE: WMT ) issued a much weaker-than-expected profit forecast, which-coupled with the release of a weak U.S. retail sales report-resulted in a sell-off in the retail sector. The Federal Reserve’s Beige Book pointed toward a continued slowdown in U.S. growth. With economic data continuing to point to weakness and the inflation rate sitting well below the target rate of 2.0%, it seems the likelihood of the Fed raising interest rates in 2015 is getting slim. The week’s positive flows into money market funds (+$7.9 billion) marks the fourth consecutive week of net inflows for the group over which time they have taken in almost $42 billion. Institutional money market funds were responsible for the lion’s share of the positive flows last week, taking in $8.2 billion in net new money this past week. ETFs (+4.7 billion) were responsible for all of the equity net inflows for the week, while equity mutual funds saw $2.2 billion leave their coffers. The Powershares QQQ Trust ETF ( QQQ , +$1.3 billion ) and the iShares Russell 2000 ETF ( IWM , +$911 million ) had the two largest net inflows on the ETF side, while for mutual funds both domestic (-$1.6 billion) and nondomestic (-$700 million) equity funds experienced net outflows. ETFs (+$2.6 billion) contributed the majority of the net new money for taxable bond funds, while taxable bond mutual funds chipped in almost $500 million. The iShares iBoxx $ High Yield Corporate Bond ETF ( HYG , +$616 million ) and the iShares iBoxx $ Investment Grade Corporate Bond ETF ( LQD , +$608 million ) were the two largest contributors to the positive flows for ETFs. Lipper’s High Yield Funds (+$378 million) and U.S. Mortgage Funds (+$326 million) classifications had the two largest increases for mutual funds. Municipal bond mutual funds took in $482 million of new money for their second straight week of net inflows. The majority of these inflows (+$319 million) came from funds in Lipper’s national municipal bond fund groups.