Equity funds had significantly net larger weekly inflows that outflows, beating bond fund in weekly asset flows data from Bank of America Merrill Lynch shows. The trend reversal in asset flows continued following significant equity fund outflows for most of 2016. The trend relative to active vs passive investment managers, however, has not abated, the January 12 report noted.

Asset flows

Asset flows – Muni funds see most weekly bond inflows, while money market outflows significantly higher than trend

Significant asset flow trends both accelerated and reversed as of the November 8 surprise US presidential election results.

Perhaps the most decided trend reversal in the data compiled by BAML’s Brokers, Asset Managers and Exchanges research team was that not only were equity flows positive, but flows into Non-US stock products showed their biggest inflows in a year.

The weekly flow into equity funds was $8 billion, significantly higher than the four week moving average of $5.3 billion. Bond funds saw $7.8 billion in inflows, nearly sixteen times higher than their weekly average inflows of $474 million.

Most of 2016, investors had been flocking to bond funds apparently at the expense of equity funds. Stock outlows started early in 2016 as the stock market sold off then recovered over the January to February period. Outflows continued to trend lower through the spring and then the trend stabilized on a relative basis until the November 8 election, when a decided trend reversal took place.

Global bond funds, meanwhile, didn’t start diverging from their mean until spring, with a decided trend acceleration occurring near the time of the UK Brexit vote. The bond trend reversal, however, after the US election and has stabilized since.

Active, High Yield and Short term bond funds are most dominated by active managers that witnessed inflows. Expertise in Emerging Market debt and Bank Loans also witnessed strong flows to active managers. Active bond managers continued to attract more assets than passive, with the worst outflows coming from active managers in Mortgage Backed Securities, Short Duration Government Bonds and Long Duration corporates.

Non-US equity funds see biggest jumps, alternatives see jump in AUM

Equity flows since the US election where much higher than bond outflows.  While bond fund flows had been flagging since the election, municipal funds turned sharply positive with inflows near $700 million, reversing ten consecutive weeks of outflows.

The move back to equity funds has taken a decided passive and international flavor. Inflows to passive equity funds totaled $25.7 billion while active outflows were $16.9 billion. Global hedge funds grabbed a significant portion of overall fund flows, tallying $8 billion in assets, the largest gain in over a year. Japanese equity funds made up a significant portion of that gain, gathering $3 billion in assets. The trend towards international equity funds is notable. Both US and Non-US equity flows had been in a downtrend since the start of 2016. Equity funds shot higher near the end of the year and are now flagging. International funds were listless after the election and are now showing small signs of life.

The equity inflows may have come as a result of money market outflows. Just over -$16.8 billion left the near cash alternative in a week, nearly six times higher than the four-week moving average of nearly $2.2 billion. Alternative funds witnessed an increase in asset flows, up $528 million on the week and decidedly bucking the four-week moving average of -$380 million.

The top passive fund seeing inflows was the Large Cap Blended funds with over $4 billion in inflows, outpacing all other funds by a factor of nearly three. Midcap Blend, Small Cap Blend, Financials, Real Estate and Health Care / Boiotech respectively followed, each with near or less than $1 billion in inflows.