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Investors Pour Money Into International Funds And ETFs

Published 01/28/2022, 03:20 AM
Updated 07/14/2020, 01:40 PM

Investors were overall net purchasers of fund assets (including those of conventional funds and ETFs) for the first week in three, injecting a net $15.2 billion for Refinitiv Lipper’s fund-flows week ended Jan. 26, 2022.

However, the headline numbers are misleading. Fund investors were net purchasers of money market funds (+$24.4 billion) while being net redeemers of equity funds (-$4.1 billion), taxable bond funds (-$3.7 billion), and tax-exempt fixed income funds (-$1.4 billion) for the week.

Market Wrap-Up

Market volatility rose significantly during the fund-flows week as investors considered the possible impacts that rising interest rates and monetary tightening might have on the economy after the Federal Reserve Board’s Federal Open Market Committee (FOMC) press conference, rising tensions between NATO and Russia, and a bumpy start to the Q4 corporate earnings season. The NASDAQ and S&P 500 indices were in correction territory for the fund-flows week, with tech issues taking the brunt of the declines.

On the domestic side of the equation, the NASDAQ Composite Price Only Index (-5.57% for the week and down 13.44% YTD) posted the largest declines of the broadly followed U.S. indices for the fund-flows week as investors headed for the exits. It was bettered by the Russell 2000 Price Only Index (-4.18% and -11.97%, respectively). The Dow Jones Industrial Average Price Only Index (-2.46%) mitigated losses better than the other U.S. indices for the week. Overseas, the Nikkei 225 Price Only Index (-1.65%) mitigated losses better than the other often-followed broad-based international indices, while the Xetra DAX Total Return Index (-2.76%) was the group laggard.

On Thursday, Jan. 20, 2022, all three U.S. indices finished the day lower, with the NASDAQ entering correction territory, after first-time jobless claims from the week prior rose to 286,000 (missing analyst expectations of 225,000), existing home sales declined 4.6% in December, and the Russia/Ukraine issues were on the rise. Despite the Peoples Bank of China cutting a key interest rate, the 10-year German bund yield turned positive for the first time in three years. Near-month crude oil prices witnessed a slight decline, closing the day out at $86.90 per barrel (bbl).

The NASDAQ Composite and the S&P 500 booked their worst one-week return since March 2020 on Friday, Jan. 21. The NASDAQ declined 2.7% on the day and the S&P 500 suffered its third straight weekly loss after corporate earnings season got off to a bumpy start, with lackluster bank results and concerns about weaker-than-expected subscriber growth from Netflix (NASDAQ:NFLX). The 10-year Treasury yield declined eight basis points (bps) on the day to settle at 1.75% and bitcoin fell below the key support level of $40,000 after Russia’s central back suggested banning the use and mining of cryptocurrencies.

The DJIA witnessed its first 1,000-point intraday turnaround in history that resulted in a closing gain on Monday, Jan. 24, ahead of the FOMC meeting this week and a slew of earnings reports. The Dow at one point was down 1,115.04 points before ending the day up 99.13 points at 34,364.50 as investors focused on a decline in corporate earnings, Federal Reserve policy, and geopolitical pressures. Front-month crude oil futures declined almost 2.2% to settle at $83.31/bbl.

The Federal Reserve kicked off its two-day policy-setting meeting on Tuesday, Jan. 25, from which investors are looking for clues to the pace of future hikes and timetable for when the Fed will begin winding down its balance sheet. In other news, the January survey of consumer confidence declined 1.4 points to 113.8, coming in slightly higher than analyst expectations of 111.7. The 10-year Treasury yield closed up three bps to 1.78%, near month crude oil prices rose 2.8% to settle at $85.60/bbl, and front-month gold futures closed at a two-month high of $1,852.50/oz.

The Dow and S&P closed lower on Wednesday, Jan. 26, after the Federal Reserve kept interest rates unchanged but signaled monetary policy will tighten soon. Fed Chair Jerome Powell said policymakers were of the mind to raise the federal-funds rate at its mid-March meeting, but no decisions were made on the course of monetary support. The 10-year yield jumped seven bps to 1.85%, while crude oil futures rose 2% to $87.35/bbl. In other news, according to Refinitiv’s Proprietary Research team, of the 100 S&P 500 constituents that have reported earnings thus far, 81% beat analysts’ expectations, slightly behind the average of the preceding four quarters of 84% beating analyst estimates.

Exchange-Traded Equity Funds

Equity ETFs witnessed their fourth week of net inflows in five, but they took in only $837 million for the most recent fund-flows week. Authorized participants (APs) were net redeemers of domestic equity ETFs (-$3.2 billion), withdrawing money for the second week in a row. However, for the sixth straight week, nondomestic equity ETFs witnessed net inflows, taking in $4.0 billion this past week. International equity ETFs (+$3.6 billion) attracted the largest draw of net new money, followed by small-cap ETFs (+$1.8 billion) and sector-other ETFs (+$1.5 billion). Meanwhile, large-cap ETFs (-$8.4 billion) suffered the largest net redemptions of the equity ETF macro-groups for the flows week.

SPDR Gold ETF (GLD+$1.9 billion) and iShares Russell 2000 ETF (IWM, +$1.8 billion) attracted the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, Invesco QQQ Trust 1 ETF (QQQ, -$4.2 billion) experienced the largest individual net redemptions, and SPDR S&P 500 ETF (SPY, -$3.6 billion) suffered the second largest net redemptions of the week.

Exchange-Traded Fixed Income Funds

For the first week in three, taxable fixed income ETFs witnessed net inflows, taking in $623 million this last week. APs were net purchasers of corporate investment-grade debt ETFs (+$835 million) and government-Treasury ETFs (+$696 million), while being net redeemers of government-mortgage ETFs (-$305 million), international & global debt ETFs (-$255 million), and corporate high-yield ETFs (-$189 million). iShares iBoxx $ High Yield Corporate Bond ETF (HYG, +$1.5 billion) and iShares iBoxx $ Investment-Grade Corporate Bond ETF (LQD, +$1.4 billion) attracted the largest amounts of net new money of all individual taxable fixed income ETFs. Meanwhile, iShares 20+ Year Treasury Bond ETF (TLT -$999 million) and SPDR Bloomberg High Yield Bond ETF (JNK, -$829 million) handed back the largest individual net redemptions for the week.

For the first week in nine, municipal bond ETFs witnessed net outflows, with investors redeeming $209 million this week. SPDR Nuveen Bloomberg Muni Bond ETF (TFI, +$137 million) witnessed the largest draw of net new money of the municipal bond ETFs, while iShares National Municipal Bond ETF (MUB, -$274 million) experienced the largest net redemptions in the subgroup for the week.

Conventional Equity Funds

Conventional fund (ex-ETF) investors were net sellers of equity funds for the third week in four—redeeming $5.0 billion—with the macro-group recording a market decline of 4.19% for the fund-flows week. Domestic equity funds, suffering net redemptions of slightly less than $5.5 billion, witnessed their fourth consecutive week of net outflows while experiencing a 4.33% market gain on average for the fund-flows week. Nondomestic equity funds—posting a 3.88% weekly loss on average—observed their sixth straight week of net inflows, taking in $494 million.

On the domestic equity side, fund investors were net redeemers of large-cap funds (-$3.6 billion) and mid-cap funds (-$658 million). Investors on the nondomestic equity side were net purchasers of international equity funds (+$726 million) but were net redeemers of global equity funds (-$233 million) for the week. Columbia Integrated Large Cap Value Fund, Advisor Shares (ILVEX, +$258 million) and Oakmark Select Fund, R6 Shares (OAZLX, +$256 million) attracted the largest amounts of net new money of all individual equity funds for the week.

Conventional Fixed Income Funds

For the first week in five, taxable bond funds (ex-ETFs) witnessed net outflows—handing back $4.3 billion this past week—while posting a 0.84% loss on average for the fund-flows week. Investors were net purchasers of flexible funds (+$265 million) and government-Treasury & mortgage funds (+$71 million) while being net redeemers of corporate high yield funds (-$2.6 billion) and corporate investment-grade funds (-$1.3 billion). BlackRock Systematic Multi-Strategy Fund, Institutional Shares (BIMBX, +$279 million) and Columbia Corporate Income Fund, Advisor Shares (CIFRX, +$243 million) took in the largest amounts of net inflows of all individual taxable fixed income funds during the week.

The municipal bond funds group posted a 0.69% loss on average during the week and witnessed its third consecutive weekly net outflows, handing back $1.2 billion this week. High Yield Municipal Debt Funds (-$383 million) and Short Municipal Debt Funds (-$370 million) experienced the largest net outflows of the group. Bridge Builder Municipal Bond Fund (BBMUX, +$47 million) and AB Municipal Bond Inflation Strategy Fund, Advisor Shares (AUNYX, +$41 million) took in the largest draws of net new money of the individual tax-exempt fixed income funds for the week.

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