Equity funds witnessed dramatic inflows of $2.76 billion in September against an outflow of $24.45 billion last year.
Tobias Levkovich and team at Citi in their recent US Equity Strategy report point out September witnessed enhanced inflow of $7.14 billion from international equity funds, while domestic equity funds saw outflows of $4.38 billion.
Foreign funds posted strong inflows
Citi analysts point out so far in 2013, total equity funds witnessed cumulative inflows of $113.60 billion. The strong inflows were aided by aggregated international flows of $100.83 billion year-to-date.
The following table highlights the flows into traditional mutual funds:
As is evident from the above table, emerging market funds witnessed modest inflows of $899 million in September, as against $1.31 billion inflows witnessed in August 2013. However, the year-to-date inflows of emerging market funds nearly doubled from $14.59 billion to $27.61 billion.
As highlighted in the following graph, the foreign equity funds posted strong inflows of $103.31 billion through October 23rd. This represents over seven times the $14.29 billion inflow witnessed over the same period in 2012.
Bond funds witnessed outflows
According to Citi analysts report, September witnessed the fourth consecutive month of outflows in the total bond funds. Investors pulled out $11.33 billion during September from bond funds. This contrasts with the 10-year September average inflow of $11.75 billion.
As can be deduced from the following graph, high yield bond funds experienced inflows of $4.02 billion in September, reversing $3.08 billion of outflows recorded in August. This was almost twice the inflow of $2.14 billion clocked in September 2012.
Outflows from growth funds
Growth funds recorded outflows of $4.60 billion in September, slipping from the $4.03 billion of outflow posted in August. For the year-to-date till September, growth funds suffered outflows of $12.40 billion. However, this pales in comparison to $70.34 billion outflow experienced during the first three quarters of 2012.
Value funds reported inflows of $221 million in September. This was down from $2.73 billion inflow recorded in August. During the first three quarters of 2013, value funds recorded $22.49 billion of inflows reversing the $25.56 billion outflow recorded during the first three quarters of last year.
Money market witnessed substantial inflows
Total money market funds, consisting retail and institutional, experienced inflows of $45.64 billion in September, showing a jump from $19.87 billion inflows recorded in August. Total money market fund assets ended September at $2.68 trillion, which was well above the level recorded in September 2012.
Equity ETFs recorded inflows of $27.23 billion in September, jumping from negative net issuance of $12.59 billion recorded in August. This marked the largest monthly inflow since January.
Tobias Levkovich and team at Citi feels with weakening EPS forward guidance trends, late 2013 may prove a bit more challenging for equities. As economic conditions improve next year, and with S&P 500 target is pegged at 1,900 for year-end 2014, Citi analysts however remain generally constructive alongside nearer term tactical caution.