Lipper U.S. Weekly FundFlows Insight Report: Taxable Bond Funds Drive Overall Net Inflows

Lipper’s fund asset groups (including both mutual funds and exchange-traded funds) took in $25.4 billion of net new money for the fund-flows trading week ended Wednesday, February 12. The largest net inflows among the asset groups belonged to taxable bond funds, at $11.7 billion, which marked the group’s sixth consecutive weekly net inflows. All of the other asset groups also had net positive flows for the week, paced by money market funds (+$7.1 billion), while equity funds and municipal bond funds grew their coffers by $4.8 billion and $2.1 billion, respectively.

Market Overview

The major equity indices all posted solid gains for the fund-flows trading week as the NASDAQ Composite Index, S&P 500 Index, and the Dow Jones Industrial Average appreciated 2.29%, 1.34%, and 0.89%, respectively. For the year to date, the largest positive return also belongs to the NASDAQ (+8.40%), followed by the S&P 500 (+4.60%) and the Dow (+3.55%), as all of the indices have recorded positive returns in five of the six trading weeks this year. This week’s positive results were influenced by optimism that the coronavirus outbreak was somewhat under control and its negative economic impact would not be as great as originally feared. Other positive economic news included U.S. unemployment claims dropping to their lowest level in nine months, as well as the Federal Reserve reporting to Congress that it believes the probability of a recession has declined.

ETFs

ETFs took in $15.3 billion of net new money this week, the group’s best result since the net inflows of $17.5 billion for the fund-flows week ended September 11, 2019. The lion’s share of this week’s net inflows was attributable to equity ETFs (+$8.8 billion) and taxable bond ETFs (+$6.3 billion), while muni bond ETFs chipped in $226 million of net new money. The largest individual net inflows for equity ETFs belonged to SPDR S&P 500 ETF (SPY, +$4.2 billion) and Invesco QQQ Trust 1 (QQQ, +$1.7 billion). For taxable bond ETFs, SPDR Bloomberg Barclays High Yield Bond ETF (JNK, +$791 million) and iShares Core U.S. Aggregate Bond ETF (AGG, +$788 million) posted the best results.

Equity Mutual Funds

The equity mutual fund asset group had net negative flows of $4.0 billion for its seventh consecutive weekly net outflows. Domestic equity funds (-$3.3 billion) were responsible for most of the week’s net outflows, while nondomestic equity funds saw $689 million leave. Large-Cap Core Funds (-$631 million) had the largest net negative flows among the domestic equity peer groups, while International Multi-Cap Value Funds had net outflows of $728 million on the nondomestic equity fund side.

Fixed Income Mutual Funds

Municipal debt funds (+$1.9 billion) took in net new money for the fifty-eighth straight week, while taxable bond funds (+$5.4 billion) extended their streak of net positive flows to six. On the taxable bond fund side, the net inflows were paced by the Core Plus Bond Funds (+$1.3 billion) and Core Bond Funds (+$1.2 billion) peer groups. Meanwhile, the High Yield Muni Debt Funds (+$588 million) and General Muni Debt Funds (+$522 million) groups had the largest net positive flows on the tax-exempt side.

Money Market Mutual Funds

Money market funds had net inflows of $7.1 billion for the week. The majority of this asset group’s peer groups saw their coffers grow, with the largest net inflows belonging to Institutional Money Market Funds (+$5.3 billion) and Institutional U.S. Government Money Market Funds (+$3.0 billion). The only peer group which saw money leave was Institutional U.S. Treasury Money Market Funds, which had net outflows of $2.7 billion for the week.