Mutual Fund Cash Flows
Chart of the Week for September 11, 2015 - September 17, 2015
Net cash flows into or out of funds can be one indicator of investor outlook for the securities markets. The chart above provides monthly estimates of the net cash flows into U.S. Equity, Taxable Bond, and International Equity mutual funds and ETF's as reported by Morningstar for August 2014 through July 2015. Morningstar estimates the net flow for mutual funds by computing the change in assets not explained by fund performance and net flow for ETF's by computing the change in shares outstanding.
The chart above shows that International Equity funds were the only segment to have positive flows for every month of the period covered, and have been particularly strong beginning in March 2015 as U.S. Equity funds began to experience larger outflows. U.S. Equity fund outflows in the first seven months of 2015 exceeded any previous annual outflow since 1993 according to Morningstar. One possible reason for the cash flow difference was that non-U.S. equities outperformed U.S. equities. The year-to-date return for the MSCI EAFE Index, a proxy for non-U.S.developed country equities, was 7.7% through July 2015, compared to the S&P 500 Index return of 3.4%.
Taxable Bond cash flow was volatile over the period, with seven months of positive flows and five months of negative flows. Strong flows that occurred in January through May 2015 were followed by negative flows in June and July 2015. According to Morningstar, outflows in June came from high yield, bank loan, and emerging market bond funds. In July, outflows continued in high yield and emerging market funds, and intermediate term funds also had large outflows.
Posted by: sarah_oz@yahoo.com
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