Long-Term Mutual Funds See Fourth Straight Week Of Outflows: Morgan Stanley

Thanks to U.S. domestic equity outflows and a large deceleration in domestic taxable fixed income inflows, long-term mutual funds were in negative territory for the fourth week in a row, notes a report from Morgan Stanley.

Betsy L. Graseck and Michael J. Cyprys of Morgan Stanley in their May 29, 2015 research note on “US Asset Managers” note domestic equity fund outflows continued for 22 straight weeks.

Outflows in long-term mutual funds

Tracking the weekly flows, the Morgan Stanley analysts point out that long-term mutual funds were in the red again, driven by domestic equity, though the outflows were more subdued w/w. Tracking the U.S. total mutual fund flows, they note overall mutual fund outflows totaled (-$5.0 billion), as long-term mutual fund outflows (-$1.7 billion) were joined by money market fund outflows (-$3.3 billion):

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As can be deduced from the following graph, money market funds witnessed outflows this week after last week’s inflows:

Money market fund flows Long-Term Mutual Funds

The following graph highlights the outflows witnessed after last week’s inflows:

Total Long-Term Mutual Funds  flows

As can be deduced from the following graph, YTD 2015, outflows were driven by money market funds, and offset by inflows to long-term mutual funds:

YTD Long-Term Mutual Funds flows

Delving deeper into domestic equity mutual funds, Graseck and Cyprys point out that the domestic equity mutual funds posted their lowest outflows in three months, despite all categories (large-, mid-, and small-cap) contributing to the outflows:

Domestic equity fund flows Long-Term Mutual Funds

Graseck et al. point out that balanced funds continued their steady pace of inflows, making it all but two weeks this year that the category has posted growth.

Balanced fund inflows Long-Term Mutual Funds

The Morgan Stanley analysts also point out a similar story with international equity, as funds in this category continued their string of solid inflows this week, led by global developed market funds:

International equity fund flows Long-Term Mutual Funds

The following graph illustrates YTD equity fund flows, highlighting inflows from balanced products:

YTD equity fund flows Long-Term Mutual Funds

Bond funds witness outflows

The MS report highlights that the real story this week is that for the first time this year, total bond mutual funds were in outflow territory as international taxable and munis both posted outflows and domestic taxable funds were barely able to eke out positive gains.

YTD bond flows Long-Term Mutual Funds

The following graph makes it clear that bond funds witnessed outflows this week following 22 straight weeks of inflows:

Bond fund outflows Long-Term Mutual Funds

The graphic following captures weekly flows to U.S. mutual funds and ETFs:

Weekly flows Long-Term Mutual Funds

Turning their focus towards ETF flows, the analysts point out that equity ETF flows accelerated w/w and bond ETFs remained in outflows for the second straight week. They note ETF inflows (+$2.0 billion) as equity ETF inflows (+$2.9 billion) are joined by outflows to fixed income ETFs (-$1.0 billion):

Total ETF flows

The following graph sets forth ETF flows YTD:

YTD ETF flows