Some Good News For Active Managers: First Weekly Mutual Fund Inflow In 12 Months

Tyler Durden's picture

Finally some good news for active managers. After one year of consecutive outflows, last week saw the first inflows into long-only equity mutual funds going back to last February, as according to BofA there finally was a $0.5 billion cash inflow, "a sign of rising investor confidence & broadening participation in equity rally." However, to put this number in context, at the same time inflows to ETFs amounted to $17.2 billion, some 35 time more.

BofA's Michael Hartnett summarizes the latest fund flows in two words: "Risk-on."

The details: largest equity inflows in 9 weeks ($17.7bn), 8th consecutive week of bond inflows ($6.7bn), precious metals inflows in 4 of past 5 weeks ($1.2bn), largest EM equity fund inflows in 6 months ($2.7bn); largest financials inflows in 3 months ($2.3bn); 14 straight weeks of inflows to bank loan funds; inflows in 11 of past 12 weeks to HY bond funds. However, European equity fund flows remain lackluster.

Looking at credit, BofA notes "IG dissonance" with chunky $37bn IG bond fund inflows past 4 months even though US IG bonds are down 3% over that period. Harnett warns that further IG underperformance
could lead to bout of IG bond redemptions

According to BofA's proprietary fund flow indicator, private clients are also in reflation mode with the past 4 weeks have seen big buyers of credit (HY, bank loans, IG, EM debt) and inflation-plays (financials, materials, precious metals) at the expense of defensives (low-vol, staples, utilities) and yield-plays (dividend-income, REITs, munis)

Going back to Hartnett's favorite topic, the so-called “Icarus Trade” profiled previously, he says "we remain long risk until Positioning turns dangerously bullish. Our Bull & Bear Indicator of investor sentiment now up to 6.8 (most bullish since Jul’14)…”sell” when indicator reaches euphoric territory of >8.0. Sustained inflows to EM equity, EM debt & HY bond funds and FMS cash falling toward 4.0% over next 6-8 weeks would trigger contrarian “sell” signal."

Finally, some more fund flow details broken down by asset class:

Asset Class Flows

  • Equities: 7 straight weeks of inflows (big $17.7bn) ($17.2bn ETF inflows and $0.5bn mutual fund inflows) (first weekly mutual fund inflows in 12 months!)
  • Bonds: 8 straight weeks of inflows ($6.7bn)
  • Precious metals: $1.2bn inflows (inflows in 4 of past 5 weeks)
  • Money-markets: $11.2 outflows

Fixed Income Flows

  • Inflows to HY bond funds in 11 of past 12 weeks ($1.0bn)
  • Inflows to EM debt funds in 6 of past 7 weeks ($1.3bn)
  • 8 straight weeks of IG bond inflows ($4.1bn)
  • 14 straight weeks of inflows to bank loan funds ($1.0bn)
  • 10 straight weeks of inflows to TIPS funds ($0.5bn)
  • $1.2bn outflows from govt/tsy funds (largest in 8 weeks)

Equity Flows

  • EM: largest EM equity fund inflows in 6 months ($2.7bn) (mostly via Global EM funds)
  • Japan: 6 straight weeks of inflows ($0.9bn)
  • Europe: tiny $73mn inflows (4 straight weeks)
  • US: $8.6bn inflows (largest in 9 weeks)
  • By sector: strong $2.3bn inflows to financial funds (largest in 13 weeks); largest inflows to consumer funds in 2 years ($1.1bn); inflows to materials in 14 of past 15 weeks ($0.8bn); inflows to energy in 10 of past 11 weeks ($0.5bn)

Source: BofA

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indygo55's picture

Fools rush in. There is no alternative (TINA). Fear of missing out (FOMA). Fools rush in. 

Arnold's picture

Ma -Pets........

Whatcha gonna do......

I feel like fleecing you.......

For a while, maybe longer if I dooo......

 

Cashing in and out again.

Don't know what I'm gonna dooo....

optimator's picture

Arnold, do you work one of the FED Trading desks?

Gilnut's picture

The boat never tips over until everybody is on one side.  I'm on the sidelines, things are looking to Titanic for my liking.

Vardaman's picture

Some people think - maybe - the world is not ending.  Heresy!  Burn the witch!

agstacks's picture

"a sign of rising investor confidence & broadening participation in equity rally."

 

Typically I'd say, "It's a trap!" 

 

But after looking at the chart and seeing HY and EM debt is where the money is going, I see that this is a sober, rational move at this point in the cycle.

jmack's picture

lol, how is that good news for active management.    you already posted a note about insiders and big banks exiting the market. now the late money is coming in to buy thier over priced crap.  The active managers dont manage shit, they follow a set of requirements which means they are going to buy the overpriced crap the insiders are selling, then after the market drops 30-50% whats left of that capital will flow right back out,  selling to close to the insiders who are buying it cheap, of course, but the "active" managers will have ruined thier reputations with another generation of suckers.

dude duderson's picture

So about the same amount came in that Catalyst was on the hook to cover?  

saveUSsavers's picture

That's RETAIL GOING TO THE SLAUGHTER! CLASSIC TOP CAPITULATION