Investors tend to be performance chasing creatures of habit, and weekly equity fund flows for the first week of 2013 reflected the quick start to the year for equity indices. With stock market averages up over 3% in the first week of 2013, it was no surprise that weekly fund flow tallies for stocks as reported by the Investment Company Institute (ICI) were also positive. What was a surprise however, was that investors set new records for weekly fund flows, allocating more capital to equities in the first week of 2013 than prior cycle highs in the first week of 2007. Weekly fund flows are an important metric to track as they relay the most recent and ongoing asset allocation by investors. This gives an indication as to which markets (stocks, bonds, or money markets) will prosper in the short-term and also as a result which asset managers may see an increase in their assets-under-management, which drives revenue.
The first week of 2013 saw $14.8 billion allocated to total equity mutual funds, which includes all domestic equity mutual funds and also foreign stock funds. This strong, positive inflow for the week ending January 9th, 2013 broke 11 consecutive weeks of outflows in total stocks funds, as the end of 2012 marked a period of uneasiness related to the still unresolved Fiscal Cliff negotiations in Congress. The 12 week moving average prior to the January 9th record week was a $3.8 billion outflow.
The impressive statistic within the strong fund inflow for the week ending January 9th, 2013 was it easily surpassed the prior record high from 2007. Prior to last week, the strongest inflow from the peak of the last stock market cycle was the weekly inflow during the week ending January 10th, 2007 where total stock mutual funds collected $10.3 billion. This was some $4 billion smaller than the opening week of 2013 (see historical chart of weekly inflows over the past 5 years as highlighted by ovals below) and bodes well that near term asset allocation can continue to be positive for equity funds.
Looking back at the prior series of record highs for total equity mutual fund flows in 2007, equity fund flows stayed positive for 7 consecutive weeks that year. This could mean that the new record inflow just seen last week in 2013 could break the decisively negative streak that marked the end of 2012. A return to consistently positive total equity mutual fund trends would benefit State Street’s S&P 500 stock ETF (SPY) and also the asset managers with substantial equity assets-under-management, including Janus Capital (JNS), T Rowe Price (TROW) and Blackrock (BLK).