馃攳
Market Meltdown and Fund Flows | The Corona Correction | Refinitiv - YouTube
Channel: Real Vision Finance
[6]
Welcome to the Corona Correction Series in
association with Refinitiv, I'm your host,
[10]
Roger Hirst.
[11]
One of the best way ways to analyse market
emotions is by following fund flows, and that's
[15]
investor money coming into and out of various
types of asset class.
[19]
I asked Tom Roseen, the head of U.S. Research
Services at Refinitiv Lipper, to shed light
[24]
on the major trends in recent fund flows and
whether we've seen investors participate in
[28]
the recent rebound.
[30]
What we've basically been seeing is really
a meltdown in the market as well.
[35]
And so while we've had a tough time, I know
all of us would expect to see a meltdown in
[39]
the market, we saw that equity funds for the
quarter, first quarter 2020, we saw equity
[45]
funds decline about 22.2, 22.33 percent.
[50]
That's the largest decline that we've seen
in equity funds since at least the Q4 2008.
[56]
So I know that we all expected this, but again,
it came on so all of a sudden.
[61]
The economics were going great, the U.S. had
a 3.5 percent unemployment rate, that's probably
[67]
jumped over 10 percent in just a month's time.
[69]
And also, one of the bigger things that we
saw that we all as investors depend on, is
[74]
we saw fixed income funds take it on the chin,
down about 4.56 percent for the quarter, now
[80]
that's a monster amount for a fixed income
volume.
[82]
Most of us had seen it as a kind of a safe
haven play.
[86]
And this was not just the Covid response,
but it also I think all of us recall that
[92]
Russia and Saudi Arabia disagreed with having
a decline in oil output, and they were starting
[98]
to get into a pricing war.
[100]
So not only do we have a decline in oil prices
because of the pricing war, but all of a sudden
[105]
the world stopped using oil.
[107]
This has been a very big time for us as investors,
and particularly for the mutual fund industry
[113]
as well.
[114]
I believe they're actually starting to get
a little bit more comfortable with putting
[118]
money to work.
[119]
As I told you, we are 22.33 percent return
on equity funds.
[123]
But the week before, if we take a look at
the actual returns for a prior week, which
[129]
have been not this past Friday, the Friday
before, we saw a 12 percent return.
[136]
By markets standards here in the U.S. and
what's amazing about that is we haven't seen
[139]
that type of return since 1974 for a one week
return.
[144]
So the investors were a little bit more confident
once they heard that governors here in the
[148]
United States were considering, along with
the President, were considering starting at
[153]
least a soft opening of the economy.
[155]
And then we also heard that the number of
cases globally, and in the United States,
[160]
have started to decline as far as number of
occurrences.
[164]
And also, the death rate is starting to slow
down a little bit.
[167]
So I think that was a big boon for investors
as well.
[170]
So here's what happened.
[171]
Here's what we saw from that.
[172]
We saw that money markets actually, one of
the big stories here is money markets took
[176]
in record amount of money.
[178]
We saw that money market funds took in six
hundred and eighty seven billion dollars for
[182]
Q1.
[183]
This is by far one of the largest money market
inflows that we've ever seen.
[187]
But what we saw is a continuation for the
weekend at April 15th, and I'm flipping weeks
[192]
around on you guys a little bit, but from
Wednesday - Wednesday basis is when we do
[196]
fund flows.
[197]
This is where we estimate how much money is
coming in and going out of the market for
[201]
mutual funds.
[202]
For the week ended April 15th 2020, we saw
that money market funds took in forty six
[207]
point eight billion, a huge amount again.
[210]
But what was comforting in actually showing
that people are starting to take their foot
[214]
off the break a little bit, equity funds took
in about $5 billion, we saw fixed income funds
[220]
take in about $10.3 billion.
[221]
And then we also saw municipal bond funds
taking in about $833 million.
[227]
Prior to that, we had only seen seven weeks
of outflows.
[229]
And I'm not talking small outflows.
[230]
I'm talking monster outflows.
[232]
So really, I do think that the average investor
out there, ETF or even professional investors,
[238]
are putting their toes in the water trying
to test what actually is going to happen.
[243]
So they're not jumping in full feet, but they're
testing the waters and I think they're feeling
[247]
much better about it.
[248]
This is going to be kind of a rip on the fund
industry.
[253]
And what I mean by rip on the fund industry,
it's going to be a really heavy road to haul
[257]
for them.
[258]
And the reason is they went from having assets
under management of about $25.8 billion or
[264]
a trillion dollars here in the United States.
[266]
And in that one quarter's time, it dropped
to $22.9 trillion.
[273]
So they saw $3.2 trillion leave in one quarter.
[277]
And it wasn't from flows, it was because of
what I was telling you about before, the 22.33
[281]
percent decline in the market and outflows
as well.
[284]
So, again, I think this is going to take a
while for the dust to settle and to see if
[289]
profitability is back on track.
[291]
But certainly while you and I as investors
have taken it on the chin, the folks running
[296]
the funds are going to struggle for a bit
as well as they try to get that asset level
[300]
back up and match the costs with revenues
coming in.
[305]
Well, perhaps it's not shocking that given
the magnitude and speed of the sell off in
[310]
equities, that the equity market had its worst
quarter for outflows since 2008.
[314]
But the significant outflows from fixed income
however, is a bit surprising, though this
[319]
reflects the need to unlock capital in order
to pay for margin calls and the destruction
[323]
of wealth in other assets.
[324]
And risk parity style funds were also deleveraging
across the board.
[328]
And asset managers also saw a mammoth decline
in assets under management of 3.2 trillion
[333]
dollars in North America, from both outflows
and equity market weakness.
[337]
And the battle between active and passive
styles, will again hot up, in order to take
[342]
the lion's share of those future flows.
[344]
Perhaps the key question is, what will happen
to the $700 billion of capital that has moved
[350]
into the safe haven of money market funds?
[352]
Currently these funds are still seeing inflows,
though at a slower pace.
[357]
Their reallocation into risky assets will
have a major influence on future asset price
[361]
performance.
[363]
We'll see you later with another update.
Most Recent Videos:
You can go back to the homepage right here: Homepage