Equity mutual funds shattered an almost year-long streak of weekly outflows as investors added $1.2 billion into these funds in the week ended February 10, according to Todd Rosenbluth, senior director of of ETF & Mutual Fund Research at CFRA, an NYC-based global independent investment research firm.
This “rare occurrence” was driven by demand for international equity mutual funds. Last week, $2.0 billion flowed into developed international market funds and $1.8 billion into emerging market products, Rosenbluth said in his latest client blog
In contrast, domestic equity mutual funds experienced net outflows of $2.6 billion in the seven-day period, this was down sharply from $11 billion from the prior week and was the lowest weekly level since mid-September 2020, the Investment Company Institute reported.
Since the beginning of 2018, there have been only 14 weeks where equity mutual fund managers had fresh cash to work with instead of dealing with redemptions, Rosenbluth said.
“In contrast, investors pulled $1.3 trillion out of equity mutual funds in the last three calendar years, while ETFs experienced $1.1 trillion in inflows. CFRA does not expect the momentum to end -- as more asset managers are offering investors a choice of structures run by the same managers,” Rosenbluth said.
The inflows to equity mutual funds are worth noting. “After 44 consecutive weeks of outflows, equity mutual funds gathered net new money,” Rosenbluth said.
Equity mutual funds pulled in some $1.24 billion of net inflows in the week ended February 10, according to data from the Investment Company Institute (ICI), an industry group representing mutual funds, ETFs, and other investment companies.
U.S. mid- and small-cap domestic equity funds had net inflows last week, but this was offset by outflows for large-cap and multi-cap, the research analyst said.
“The last time asset managers collectively had new cash to work with, the U.S. stock market was recovering from the pandemic-induced bear market,” Rosenbluth said. In the week ended April 1, 2020, domestic equity mutual funds pulled in $8.2 billion but this short-lived action only partially recouped the $58 billion of net outflows in the prior two weeks.
“While we hope the bleeding slows, consecutive weeks of equity net inflows are a rare occurrence. The three-week period ended January 23, 2019 was the last time there were back-to-back weeks of new money for equity mutual funds. Back then, domestic equity funds were the driver, with the asset category gathering a collective $8.8 billion, more money than $5.9 billion for world equity funds,” the veteran analyst said.
Since 2018, ETFs have gained market share and more asset managers with American Century, Clearbridge, Dimensional Funds, Fidelity, and T. Rowe Price having launched active ETFs run by the same personnel as popular mutual fund strategies. These include American Century Focused Dynamic Growth ETF (FDG), Clearbridge All Cap Growth ETF (CACG), Dimensional US Core Equity Market ETF (DFAU) Fidelity Magellan ETF (FMAG), and T. Rowe Price Blue Chip Growth ETF (TCHP), Rosenbluth said.