Mutual funds started off the year strong with a slight week over week improvement in long-term outflows after ending 2015 with record outflows.
Digging deeper into the data, however, indicates mixed results among the different types of funds. For example, international equity funds turned positive for the first time in 11 weeks, although domestic equity funds witnessed an acceleration in outflows.
FANG stocks affect mutual funds performance
Morgan Stanley analyst Michael Cyprys released the latest edition of his “Asset Managers” report on Jan. 8. That outflows in all nine of domestic equity mutual funds’ sub-categories drove the 26th consecutive week of outflows. Mutual funds got hammered in 2015 because most of them missed out on the crazy momentum of the four key stocks: Facebook, Amazon, Netflix and Google, better known as FANG.
Balanced funds reversed course last week, shifting to outflows from the previous week’s inflows.
So far year to date, domestic equity mutual funds drove the outflows, while balanced funds saw “slight” outflows and international equity funds racked up “slight” inflows.
Inflows to global developed markets more than offset outflows from emerging markets funds to turn flows in international equity funds positive for the first time in 1 weeks.
In the fixed income market, floating rate/ TIPS mutual funds drove the outflows in domestic taxable funds. Domestic tax-free bond fund flows recorded eight weeks in a row of inflows with inflows coming in 69 of the last 99 weeks, reports Cyprys.
The story wasn’t any better with international taxable fixed income funds with both developed and emerging markets being in the negative.
Municipal bond mutual funds continued to be resilient last week as they posted inflows again, marking the eighth week in a row of inflows, according to Cyprys. Year to date, municipal funds drove the inflows to total bond mutual funds, although outflows to both domestic and international taxable funds offset those inflows.
Money market funds saw a second consecutive week of outflows with inflows in 56 of the last 93 weeks.
Exchange-traded funds turned negative last week, marking the first time in 15 weeks that this category saw negative flow trends. ETFs saw inflows in 76 of the last 100 weeks, said Cyprys.
Equity ETF outflows drove those outflows, although bond ETFs partially offset them.
All graphs in this article are courtesy Morgan Stanley.