May Saw Modest Long-Term Mutual Fund Inflows: BofAML

Long-term mutual fund inflows moderated in May, as active equity and fixed income eased, though passive equity strengthened, notes BofAML.

Michael Carrier and team at Bank of America Merrill Lynch in their June 14, 2015 research report titled: “Monthly Mutual Fund Analyzer: Long term inflows moderate” point out that the outlook for asset managers is decent despite volatile markets.

Long term inflows: Total mutual fund industry flows turned positive in May

After sifting through data from Simfund, the BofAML analysts offer a number of useful charts and tables. They point out that total industry flows turned positive in May, to $53.4 billion compared to -$49.9 billion in April. This was aided by a positive reflection in money market funds, while long-term inflows eased:

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Carrier and colleagues highlight that equity inflows held roughly steady at $15.8 billion from $14.2 billion in April, as active inflows decelerated, while passive inflows strengthened.

The following charts capture the monthly equity flows across active, passive and domestic equity:

Equity Long Term Inflows

Turning their focus towards fixed income flows, the analysts note fixed income mutual fund inflows decreased to $7.0 billion compared to $13.7 billion witnessed in April. They point out that this is attributed to negative inflection in passive flows. Slicing the data further, the BoAML analysts note among fixed income categories, high yield, gov’t and muni flows turned negative, while investment grade flows stayed positive:

Fixed income Long Term Inflows

They also note that money market flows turned positive following seasonal pressure, to $30.6 billion compared to -$77.8 billion in April.

Analysis based on style

Carrier et al. also analyzed industry data to provide insight into flows by investing style. On equity styles, leading inflows were clocked by Foreign large blend ($14.1 billion), Financial Services ($1.9 billion), Multialternatives ($1.9 billion), Health Care ($1.8 billion) and China Regional ($1.5 billion).

Long Term Inflows by equity style

The following chart captures net flows by equity styles for 2015 YTD:

Net flows by equity styles - YTD Long Term Inflows

Examining data for fixed income styles, the analysts note leading inflows were recorded by Intermediate Term Bond ($4.7 billion), World Bond ($2.6 billion), Multisector Bond ($0.9 billion), Emerging markets bond ($0.8 billion) and Muni National Intermediate ($0.8 billion):

Net flows by fixed income style Long Term Inflows

Highlighting industry performance, one can see that 35% of equity funds and 41% of fund assets beat the S&P 500, indicating better performance by larger funds:

Performance by larger funds Long Term Inflows

Considering decent LT flow trends and rising markets, the BofAML report highlights that the outlook for asset managers is decent, with their top picks AMG, BLK and IVZ.