Fund Flows Mirror the Markets

Equity mutual funds had a second week of net outflows, losing $2.4 billion as investors continued to respond to the market selloff and exited domestic funds, while money market funds took in $16.7 billion as investors anticipated an interest rate hike from the Fed.

Fund tracker AMG Data Services also reported a fourth straight week of bond outflows as investors focused on interest rate prospects, with outflows from most fund categories totaling $6.6 billion in the week ended May 12.

Rival fund tracker TrimTabs said equity fund flows were nearly flat for the same period. "If the weak U.S equity inflows turn into outflows, it would suggest that a bottom may be forming," the company said.

Money market funds now have more than $2 trillion in assets, after months of declines.

All major equity fund categories saw net outflows, according to AMG. Domestic equity funds accounted for 88% of the exodus, while emerging market equity funds saw their largest recorded outflow at $464 million. Other international equity funds reported $278 million in redemptions.

TrimTabs also reported a net $1.4 billion outflow, which it said could be expected to continue based on the recent spike in bond yields following the latest batch of strong employment figures.

According to AMG, the exception to the bond fund exodus was government bond funds investing primarily in Treasury Inflation Protected Securities, or TIPS, which saw inflows of $224 million following the announcement last week of plans to sell TIPS with new maturities..

High yield corporate bond funds saw $2.15 in outflows, and taxable bond funds saw outflows of $2.5 billion the largest total for each category since the week ended Aug. 6, 2003, according to AMG.

Municipal bond funds saw net outflows of $1.3 billion, the highest weekly total recorded since Nov. 9, 1994.

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