By Minyi Chen, CFA, Chief Operating Officer of TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSEARCA:TTFS)
All Equity Funds Get $281 Billion, Biggest Inflow since 2000. Bond Funds Redeem $24 Billion, Biggest Outflow since 2000.
The Federal Reserve has been trying for almost five years to coax savers and investors into stocks by printing money to inflate the prices of assets in general and U.S. stocks in particular. The Fed finally seems to be succeeding. We are witnessing the biggest shift in fund flows since the crash of 2008.
On the one hand, investors have flocked to equities. The inflow of $281 billion into all equity mutual funds and exchange-traded funds this year through Monday, October 28 is the biggest annual inflow since the height of the technology stock bubble in 2000, when $324 billion flowed into equity funds. Breaking flows down, U.S. equity MFs and ETFs have issued $124 billion this year, the first annual inflow since 2007. Global equity MFs and ETFs have issued $157 billion this year, the fifth consecutive annual inflow.
On the other hand, bonds have fallen out of favor as yields started to back up in May and investors contemplated "tapering" by the Fed. Bond MFs and ETFs have lost $24 billion this year, the first annual outflow since an outflow of $7 billion in 2004 and the biggest annual outflow since an outflow of $50 billion in 2000.
Examining more recent flows, investors have been pumping huge sums into equities in October. Although global equity funds have only about one-third the assets of U.S. equity funds, global equity MFs and ETFs have received $24.5 billion this month, roughly equal to the inflow of $24.6 billion into U.S. equity MFs and ETFs. The global equity fund inflow is the second-highest this year, while the U.S. equity fund inflow is the third-highest this year.
The combined inflow of $49.1 billion into all equity funds this month is the fourth-highest on record. Note that three of the four largest inflows have all happened this year.
Industrials, Consumer Discretionary, and Information Technology Most Popular Sectors in Past Month. ETFs in These Sectors Issue at Least 25% of Assets Year-to-Date.
Equity sector flows were fairly subdued in the past month. The most popular sectors-Industrials, Consumer Discretionary, and Information Technology-were all higher-beta sectors, but no sector posted an inflow topping 4% of assets. The only sector that posted a significant outflow was Utilities, which redeemed 5% of assets.
Recent flows have been generally a continuation of established trends. Industrials, Consumer Discretionary, and Information Technology have all received at least 25% of assets this year. The only sectors to post outflows this year have been Consumer Staples, which has redeemed 5% of assets, and Utilities, which has redeemed 6% of assets.
New Offering Calendar Slows Down This Week. DealogicReports $2.7 Billion Scheduled for Tuesday and $1.2 Billion Scheduled for Later This Week.
New offerings hit an 11-week high of $11.1 billion in the previous week, but the "white shoes" are not likely to be as busy this week despite the ongoing melt-up in stock prices.
In addition to the $1.5 billion that priced Friday and Monday, Dealogic reports that $2.7 billion is scheduled for Tuesday-led by the $850 million Brixmor Property Group IPO and a $750 million overnight follow-on for Plum Creek Timber-and $1.2 billion is scheduled for later this week-led by the $300 million Essent Group IPO expected Wednesday and a $300 million overnight follow-on for Artisan Partners Asset Management. Unless some huge overnight deals materialize, new offerings should not exceed $7 billion this week, which would be below our upfront estimate of $9 billion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: AdvisorShares is an SEC registered RIA, which advises to actively managed exchange traded funds (Active ETFs). This article was written by Minyi Chen, CFA the portfolio manager of the AdvisorShares TrimTabs Float Shrink ETF (TTFS). We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. This information should not be taken as a solicitation to buy or sell any securities, including AdvisorShares Active ETFs, this information is provided for educational purposes only.
Disclaimer: To the extent that this content includes references to securities, those references do not constitute an offer or solicitation to buy, sell or hold such security. AdvisorShares is a sponsor of actively managed exchange-traded funds (ETFs) and holds positions in all of its ETFs. This document should not be considered investment advice and the information contain within should not be relied upon in assessing whether or not to invest in any products mentioned. Investment in securities carries a high degree of risk which may result in investors losing all of their invested capital. Please keep in mind that a company’s past financial performance, including the performance of its share price, does not guarantee future results. To learn more about the risks with actively managed ETFs visit our website AdvisorShares.com.This communication is a publication of TrimTabs Asset Management. It should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Information presented does not involve the rendering of personalized investment advice. Content should not be construed as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein. Performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing performance returns. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Past performance may not be indicative of future results. Therefore, no investor should assume that the future performance of any specific investment or investment strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions, may materially alter the performance of an investor’s portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio.