by Jack Fischer
During LSEG Lipper’s fund-flows week that ended July 3, 2024, investors were overall net purchasers of fund assets (including both conventional funds and ETFs) for the 9th week out of 11, adding a net $39.9 billion.
This past week, money market funds (+$23.3 billion), equity funds (+$10.3 billion), taxable bond funds (+$6.0 billion), commodities funds (+$414 million), tax-exempt bond funds (+$345 million), and alternative investment funds (+$254 million) attracted inflows.
Mixed-assets funds (-$679 million) was the only group to see outflows.
Active equity funds (-$5.9 billion) suffered outflows for the 15th week straight. This was their largest weekly outflow since the week ending January 3, 2024. Passive equity funds (+$16.2 billion) reported the second-largest weekly inflow of the year as they attracted new capital in back-to-back weeks.
Both active (+$6.0 billion) and passive (+$327 million) fixed-income funds saw inflows. Active fixed-income funds have attracted inflows in 9 of 10 weeks. Passively managed fixed-income funds have seen 5 straight weeks of inflows.
In aggregate, spot bitcoin ETFs saw an inflow (+$222 million) over the week, the first inflow in 3 weeks.
Index Performance
At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported mostly positive returns— DJIA (+0.46%), Nasdaq (+2.15%), Russell 2000 (+0.92%), and S&P 500 (+1.08%). The DJIA has appreciated for 3 consecutive weeks.
Broad-based fixed-income indices mostly saw losses on the week—FTSE U.S. Broad Investment Grade Bond Total Return Index (-0.02%) and FTSE Municipal Tax-Exempt Investment Grade Bond Index (-0.10%) realized sub-zero returns. The FTSE High Yield Market Total Return Index (+0.04%) logged its fourth gain over the prior five weeks.
Overseas broad-based indices had a strong showing—the DAX Total Return (+2.37%), FTSE 100 (+0.43%), Nikkei 225 (+1.83%), S&P/TSX Composite (+2.44%), and Shanghai Composite (+0.24%) all observed plus-side returns.
Rates/Yields
The 2-year Treasury yield (-0.53%) fell while the 10-year (+1.33%) rose over the week. Since the start of the year, both yields have risen 10.38% and 12.44%, respectively.
According to Freddie Mac, the 30-year fixed-rate average (FRM) increased for the first week in 5 weeks, with the weekly average currently at 6.95%. Both the United States Dollar Index (DXY, -0.73%) and VIX (-3.80%) fell over the week.
For the next meeting, the CME FedWatch Tool has the likelihood of the Federal Reserve leaving interest rates unchanged at 93.3%. This tool forecasted a 19.3% possibility of a 25-bps cut one month ago. The next meeting is scheduled for July 31, 2024.
Exchange-Traded Equity Funds
Exchange-traded equity funds recorded a $19.0 billion weekly inflow—its second in 3 weeks. The macro-group posted a 1.22% gain on the week, its 4th gain in 5 weeks.
Large-cap ETFs (+$12.1 billion), multi-cap ETFs (+$2.9 billion), and developed global markets ETFs (+$1.8 billion) posted the largest inflows. Large-cap ETFs have seen 8 weekly inflows over the past 10. Under this subgroup, the S&P 500 Index Funds Lipper classification added $7.2 billion.
World sector equity ETFs (-$268 million), small-cap ETFs (-$122 million), and emerging markets equity ETFs (-$110 million) witnessed the top weekly outflows under equity ETFs. World sector equity ETFs have suffered 12 outflows over the prior 15 weeks.
Over the past fund-flows week, the top 2 equity ETF flow attractors were iShares Core S&P 500 ETF (NYSE:IVV) (IVV, +$6.2 billion) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ) (QQQ, +$3.9 billion).
Meanwhile, the 2 equity ETFs leading in weekly outflows were iShares Russell 1000 ETF (NYSE:IWB) (IWB, -$1.3 billion) and VanEck Semiconductor ETF (NASDAQ:SMH) (SMH, -$983 million).
Exchange-Traded Fixed-Income Funds
Exchange-traded taxable fixed-income funds observed a $982 million weekly inflow—the macro group’s 8th weekly inflow in 9 weeks. Taxable fixed-income ETFs reported a slight gain of 0.01% on average, marking the 2nd plus-side return in 3 weeks.
General domestic taxable fixed-income ETFs (+$2.0 billion), government & Treasury fixed-income ETFs (+$864 million), and world income ETFs (+$37 million) were the only subgroups under taxable bond ETFs to observe inflows. General domestic taxable fixed-income ETFs were led by the corporate debt ETFs BBB-Rated classification (+$1.6 billion), which realized its largest inflows since the week ending March 6, 2024.
Short/intermediate investment-grade ETFs (-$889 million), high yield ETFs (-$747 million), and short/intermediate government & Treasury ETFs (-$181 million) were the top taxable fixed-income subgroups to record an outflow on the week. This was the first weekly outflow in 4 weeks for short/intermediate investment-grade ETFs.
Municipal bond ETFs reported a $75 million outflow over the week, marking the second straight weekly outflow. Municipal bond ETFs also realized their 4th gain (+0.06%) in 5 weeks.
iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) (TLT, +$1.2 billion) and iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD) (LQD, +$1.1 billion) attracted the largest amounts of weekly net new money under fixed-income ETFs.
On the other hand, iShares Core U.S. Aggregate Bond ETF (NYSE:AGG) (AGG, -$912 million) and iShares 7-10 Year Treasury Bond ETF (NYSE:IEF) (IEF, -$908 million) suffered the largest weekly outflows.
Conventional Equity Funds
Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$8.7 billion) for the 125th week straight. Conventional equity funds posted a positive weekly return of 0.98%.
Large-cap funds (-$2.7 billion), multi-cap funds (-$1.7 billion), and small-cap funds (-$1.1 billion) were the top conventional equity fund subgroups to realize weekly outflows. Large-cap conventional mutual funds logged their 28th outflow over the past 30 weeks, led by the Large-Cap Growth classification (-$1.8 billion).
No subgroup under conventional equity mutual funds reported an inflow over the trailing week.
Conventional Fixed-Income Funds
Conventional taxable-fixed-income funds realized an inflow of $4.9 billion, marking their first inflow in four weeks. The macro-group realized an average gain of 0.03%, their 2nd week in the black over the past 3.
Short/intermediate investment-grade funds (+$3.3 billion), general domestic taxable fixed-income funds (+$900 million), and high-yield funds (+$541 million) led taxable fixed-income subgroups in net inflows. Short/intermediate investment-grade funds were lifted by the Ultra-Short Obligations Funds classification (+$1.5 billion).
Government & Treasury fixed-income funds (-$119 million), world income funds (-$74 million), and emerging markets debt funds (-$65 million) were the only taxable fixed-income subgroup to observe outflows over the week.
Municipal bond conventional funds (ex-ETFs) returned a negative 0.04% over the fund-flows week, giving the subgroup back-to-back weeks of sub-zero returns. Tax-exempt fixed-income mutual funds experienced a $420 million inflow, marking the first inflow in four weeks.