Another Week Of Huge Outflows From Active Managers, Huger Inflows To ETFs

Tyler Durden's picture

The highly compensated world of active fund managers continued to disintegrate before their eyes in the last week, when according to EPFR data even as overall cash continued to flood into equities for a total of $14.5 billion, the 11th consecutive week of inflows, this was entirely due to allocations to ETFs, which saw $19.7 billion in inflows, the highest weekly amount YTD, offset by $5.1 billion in outflows from actively managed funds.

Looking at what its private clients are doing, BofA notes that the top 3 ETF inflows past 4 weeks = Financials, Bank Loans, MLPs (page 3); Furthermore, despite all the talk of cash on the sidelines, private client asset allocation has hit 60% for stocks, just shy of all time highs, offset by  bonds 23%, cash 11%.

At the current rate of "great rotation" from active to passive managers, the inflection point at which the two asset classes meet will hit far sooner than the previous forecast.

And speaking of great rotations, another notable feature from last week's fund flow data was the bond outflows in 12 weeks ($0.1bn), led by largest HY bond redemptions more than 2 years ($5.7bn); contrast with strong inflows equities ($14.5bn this week). According to BofA, YTD equity inflows of $97 billion now substantially surpass bond inflows of $79bn. While it will come as no surprise, junk bond spreads and the eerie calm in the stock market continue to be highly correlated.

Some more fund flow details:

Fixed Income Flows

  • Largest HY bond fund outflows in more than 2 years ($5.7bn)
  • 12 straight weeks of IG bond inflows ($3.1bn)
  • 7 straight weeks of inflows to EM debt funds ($0.7bn)
  • 18 straight weeks of inflows to bank loan funds ($0.9bn)
  • 14 straight weeks of inflows to TIPS funds ($0.2bn)
  • First inflows to govt/tsy funds in 7 weeks ($0.1bn)

Equity Flows

  • EM: largest outflow in 11 weeks ($1bn)
  • US: largest inflow in 13 weeks ($12bn)
  • Japan: 10 straight weeks of inflows ($1.2bn)
  • Europe: modest $0.2bn outflow

By sector: largest inflows to US value funds in 16 weeks ($2.8bn) vs $0.3bn outflows from US growth funds; inflows to materials ($0.4bn, 9 of last 10 weeks), utilities ($0.4bn), tech ($0.3bn) and energy ($0.2bn); outflows from financials ($0.1bn), real estate ($1bn, largest in 11 weeks), consumer ($0.1bn), and healthcare ($0.2bn).

* * *

Finally, regarding the timing of BofA' "Great Fall" market forecast, we are still in the "not yet" phase:

Fed & Humpty-Dumpty: “great fall” in risk assets, “great rise” in vol likely flagged by higher wage inflation (AHE>3%), hawkish Fed (yield curve bear flattens), EPS growth peak, financial “stress” via HY bond spreads (v correlated with VIX); spreads >400bps this week, but need to rise further 50-75bps to elicit cross-asset vol.

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Hammer823's picture

Everyone's jumping on board the rigged tide.  A rising tide lifts all boats.  Picking individual stocks is like throwing darts at a board. It fails more than half the time. Dumping your money in an ETF that is rigged to go up is guaranteed money.  People are changing their investment approach and going with the sure thing.

GRDguy's picture

The only "sure thing" is that the financial sociopaths will win: heads they win, tails you lose.

Hammer823's picture

I've been winning almost everyday for 10 years.

HRClinton's picture

Unless you have access to elite CFPs, and I mean the Top 1%, you are better off with ETFs.

Otherwise the fees will burden the gains too much.

If these Brokers can't make money for you, or are so dumb that they get caught for Insider Trading, they can always start their own contrarian Web site. It's been done. Somewhere near hear, I think.

spastic_colon's picture

yes...the "active" managers are buying the ETF's.......real "active" guys......this is what happens when you let the global banks own the markets......ETF's still do not provide all of the benefits of individual securities but when your 401k, pension, DC plan etc etc control most of peoples liquid wealth you don't have a choice; those with real wealth (liquidity) use actual securities.

NoDebt's picture

I like that idea.  Then the money would be double-counted.  Same dollar goes into an active fund (inflow) and that manager then uses it to buy an ETF (also an inflow).

That kind of win-win idea would make you a very rich man on Wall St.


Countrybunkererd's picture

Sorry, i can't help it.  We all make mistakes and whatnot but:

HUGER?  What next a deader cat bounce?  or is it a deaded and a deadeder cat bounce?  Spelling and typos are one thing but the integrity of a language is essential for a society.  I have not had my morning constitutional yet (hat tip to Dr. E), maybe i am just loaded with toxins or gas. 

Countrybunkererd's picture

I am showing my age, i am not yet senile, but becoming a grumpy old man.  with gas.  For example, i love the corvette Z06 but by the time i will be able (on my terms not the banks) to buy one i will have forgotten that i wanted one.

mary mary's picture

I have a vewy good fwiend in Wome name Hugus Dickus.

Dead Canary's picture

I think you mean Bigus Dickus. Hugus is his bwother. FYI.

mary mary's picture

And his wife's name... is.....

Vardaman's picture

Averaging is good.  Except when it isn't...

venturen's picture

Lake Wobegon....all investors are receiving above average returns

Spungo's picture

You know shit is whack when people are piling in as rates rise.

Captain Sensible's picture

Buffett told them to!   baaahh  baaaah  baaah 

gizmotron's picture

Enjoy the ride. Hope you get out before the fall.