"No Rotation" - Fund Flows Lag Returns, Not Lead

Tyler Durden's picture

There is a simple reason why the real money (as opposed to fast money tweakers) has been far less excited about the domestic equity fund inflows than the financial media and their sponsoring commission-takers would suggest. The reason is - as Goldman shows empirically, not anecdotally - fund flows 'lag' performance, 'not lead'! As we have noted previously, the great rotation myth is simply that - a unicorn-like belief that the investing public will sell down their bond portfolios (high-yield, investment-grade, and sovereign) to stake their future on stocks - when the reality is the flows (which are not rotating to stocks 'net' anyway) simply reflect the sheep-like herding of performance-chasing index-huggers hoping to beat the greater fool. There always has to be someone left holding the bag...



Table: Goldman Sachs

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chump666's picture

That's right.  A woeful con job by funds too suck in the tapped out and poor retail investor, cept they didn't buy in.  With the DXY bid http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=2013_02_... Most are dumping back into USD safe havens all the while Wall Street is creating a death trap for it's self. 

DJ Happy Ending's picture

A death trap they will be bailed out of.

Yen Cross's picture

  That's what happens when all the RAT's jump from APPL onto the AIG life boat. (for 0-10 basis points)


Waterfallsparkles's picture

This time the bag holders may be them.  Boomers are not going to let go of their Bond funds.  In fact more will be withdrawing from stocks and looking for safer havens.

SunRise's picture

Can somebody turn off all the moving ads? - CHEESYYY and DISTRACTING

Pure Evil's picture

But, then who would pay for the free content?

GMadScientist's picture

Yes, YOU can...but no, I won't tell you how.

Clowns on Acid's picture

That was then....this is now.
The Fed will decide how far up, or down (every now and then just to keep up appearances) the S&P goes.

Downtoolong's picture

the flows simply reflect the sheep-like herding of performance-chasing index-huggers

I imagine a lot of them are institutional investors trying to save their jobs and asses hugging the status quo too. Because, “Hey I’m just following the guidelines and who am I to step out on my own and do something besides what Goldman tells me to? Those fuckers can crush me in the markets if they want to.”

The tentacles of central planning reach everywhere. Do you know what your pension fund manager is betting on lately?

trebuchet's picture

I also believe the source of the fund flow was the one off boost to Perosnal disposable income in December that spiked as companies brought forward bonuses to avoid the tax hikes. 


Now we have the tax hikes and no bonuses, fund flow will fall back a lot.



alfbell's picture



Please tell. Would the fact that a rotation from bonds to stocks is NOT happening be considered a deflationary oriented situation?

If the fixed income/bond investors hold their position and stay, how will this reflect on The Bernank and the Fed?

dunce's picture

The index funds remind of the reporter that asked a mountain climber why he risked his life doing something that changed nothing, and was stunned by the profound??? answer that he climbed them because they were there. These fund managers by design buy stuff "because it is there".

moneybots's picture

"If the fixed income/bond investors hold their position and stay, how will this reflect on The Bernank and the Fed?"


The interesting thing is that i am totally turned off by the stock market, even at a new all time high.  I smell a fraud.


I am inundated with re-fi ads.  It turns my stomach to even think of re-fying.  I smell a  fraud.


I get ads in the mail from CHASE offering me 200 dollars to open an account.  I throw them in the trash.  I smell a fraud.


My trust in the system is GONE.