Fixed income got hit hard this week according to fund flow data from Lipper (and compiled by Goldman Sachs). More data on US flows in various asset classes this week via Goldman Sachs.
Fixed income outflows; Equity MF inflows
As per Lipper FMI, equity fund flows were +$507 mn this week (vs. -$1 bn last week via ICI), with outflows in domestic equity (-$769 mn vs. -$1.7 bn last week) and inflows for non-US equity (+$1.3 bn vs. +$707 mn last week). 2QTD equity inflows are +$11.9 bn, while YTD flows are +$78.7 bn. Bond flows stood at -$5.7 bn (taxable: -$4.3 bn driven by -$3.2 bn out of high yield; muni: -$1.4 bn), vs. last week’s +$1.4 bn (taxable: +$1.6 bn; muni: -$216 mn). 2QTD bond flows are +$23.8 bn; YTD flows are +$92.9 bn. Money market flows were -$2.5 bn this week vs. last week’s +$12.2 bn, via ICI. 2QTD MMF flows are +$23 bn; YTD flows are -$77.9 bn.
ETFs: Soft equity/bond flows Equity
ETFs (ex-comm.) saw outflows of -$2.8 bn this week (vs. last week’s -$545 mn), bringing 2QTD inflows to +$25.8 bn and YTD to +$76.8 bn. Commodity ETF flows were -$15 bn. Bond ETFs saw flows of -$4.8 bn (taxable: -$4.8 bn with -$1.4 bn out of high yield; muni: -$62 mn) this week, vs. -$1 bn last week. 2QTD bond ETF flows are +$4.8 bn, with YTD inflows at +$11.8 bn.
Equity and fixed income performance
2Q13TD equity fund performance is +2.1%, vs. the S&P 500’s +3.4%. The group’s average 2Q13TD fixed income performance is -0.5% vs. Barclays Aggregate Bond Index’s -1.6%. Buy BLK: Opportunity amid volatility
Buy on BlackRock, Inc. (NYSE:BLK) as in our view the fundamental thesis is on track while recent under performance (-200 bps vs. peers since mid-May) creates a buying opportunity. Chairman and CEO Larry Fink affirmed at an industry conference this week that the firm could achieve 40%+ margins, double-digit EPS growth and 5% organic growth this year, supported by secular ETF growth in passive and solid active performance (ex. rebuilding an active equity franchise). We think the capital return story is also intact, with $3 bn+ in annual FCF for possible buybacks (authorized to repurchase about 5% of 1Q13 diluted share count) and dividends (GSe: 40% dividend payout ratio). Meanwhile, valuation is in line with peers’ amid recent volatility. We expect the shares to rerate as strong fundamentals drive 22%/18% EPS growth in 2013/14.