Last week, institutional clients were the sole net buyers following three weeks of selling, while hedge funds conversely turned into net sellers after three weeks of buying, notes Bank of America Merrill Lynch. In their weekly report dated April 28, capturing an aggregated view of BofA Merrill Lynch client trading flows into U.S. stocks executed by the cash equities business of the firm, Jill Carey Hall and team at BAML points out that buying by corporations and institutions offset that of hedge funds and retail selling.

BAML clients were net buyers for second week

The BAML analysts report that on the back of S&P 500 moving up 1.8% last week, its clients were net buyers of U.S. stocks for the second week, in the amount of $1 billion. Last week turned out to be the best week for the S&P since March. The analysts point out that their clients were net buyers of U.S. equities on a four-week average basis, which has been the case since early December:

BofAML clients are net buyers institutional clients

As can be deduced from the following tables, while net buying was in both small and large caps, mid-caps witnessed net sales.

Institutional Clients buys by size segment

Delving deeper into YTD data, the analysts said that year-to-date, BAML clients have been net buyers of ETFs plus single stocks in seven of the ten sectors led by Tech and Industrials. As set forth in the following table, all client groups except institutional clients were net buyers of equities YTD. Moreover, clients have bought stocks in all three size segments so far this year:

Cumulative net buys by BofAML clients Institutional Clients

Focusing on weekly flows by sector, Hall and team points out that net buying last week was led by ETFs plus single stocks in the Financials, Tech and Health Care sectors.  The analysts noted that many companies from Financials and Tech reported mixed results last week, while Health Care has seen the most positive surprises so far this earnings season. They highlight that Financials and Tech currently have the longest net buying trends at five consecutive weeks each, while Industrials and Energy have the longest net selling trends at four consecutive weeks each.

Institutional Clients buys by sector

Recent pickup in corporate buyback

Turning their attention to buybacks, the BAML analysts point out that the level of corporate buybacks on a four-week average basis had been trending down since the end of January, though it ticked up over the last two weeks. The recent pickup in corporate buyback activity has been led by Financials and Health Care. Moreover, buybacks in most sectors (except Staples) were higher than the four-week average trend:

Buybacks by sector Institutional Clients

The analysts have also provided a breakout of BAML pension fund client net buys. The analysts note that pension funds were net buyers of U.S. stocks in 2008, 2009, 2010, 2012 and 2014, while institutional clients overall were only net buyers in 2009 and in 2011. On a four-week average basis, pension fund clients were net sellers of U.S. stocks, though they remained net buyers year-to-date.

Pension fund Institutional Clients