What flows out, must flow in?

January 22, 2013

Much has been made of the flows into U.S. equities this month. Funds have rolled out the red carpet for a record $11.3 billion or so in net inflows over the first two weeks of the year, more when you factor in ETFs.

Just to cool the enthusiasm a little, it’s worth remembering that this comes after a torrid 2012.

Our graphic detailing Lipper’s latest estimated net flows in and out of various fund sectors shows combined outflows from U.S. equity funds and U.S. small cap funds reached a total of more than $150 billion last year. The fourth quarter alone contributed more than $50 billion of that.

To make the point more forcefully, those 12-month net outflows from the two sectors are far in excess of the rest of the top 25 worst-hit fund sectors combined. 

So there’s a fair deal of ground to catch up, and just as it makes recent inflows seem less gargantuan, that yawning gap can also be seen as succour to the bull case for equities in the U.S. and beyond (a bull case which now includes — oxymoron ahoy — permabears among its adherents).

You can view the full interactive graphic by clicking on the image below.

Of course, the glut of withdrawals from U.S. equity was a much touted trend; there are some less well-known nuggets among the Lipper data.

Notably, U.S. income funds took in a good chunk of the cash flooding out of their domestic peers, posting the fourth largest net inflow over the year. And just behind them, Swedish equity funds nudged into the top five, rewarded for a growth story that sharply contrasted with those of its euro zone neighbours.

There was clearly some hunting for returns further down the market scale too, with four regional small and midcap fund sectors making it into the top 25 for the year. And looking at the fourth quarter alone,  European small and midcap funds  pulled in a healthy $890 million, while another $440 million made its way to Asia Pacific smaller companies funds. There be stock pickers here; maybe the trampling of active management by the ETF behemoths isn’t quite a one-way street just yet.

COMPETITION TIME*: A quick look at the performance numbers for 2012 shows that only four equity fund sectors put in a negative return over the 12 months… Reward yourself with a pat on the back and a firm handshake if you can name all of them before checking.

I’ve concentrated on the equity story here. You can play around with the interactive graphic to look more deeply at bond fund sector flows and performance.

For any questions on the data, you can contact me on Twitter at @reutersJoelD or via Reuters messenger.


*No actual prize available


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