Source: Investment Company Institute



Interesting tidbit for those who are concerned with fundflow: Standard & Poor’s 500 Index more than doubled from the March 2009 lows even though money flowed out of stock funds most of the time. (Data source: Investment Company Institute)

In January, equity funds took in $19.6 billion. This was the largest inflow since ICI started tracking the data six years ago. During the prior 4 year rally, outflows exceeded $435 billion.



David Wilson
Chart of the Day, February 14, 2013

Category: Investing, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

23 Responses to “Do Record Equity Inflows Mean Anything?”

  1. stonedwino says:

    The 1% and corporate America have no place to put all that cash they have been siphoning from the economy…cash yields bubkus and bonds…yeah, bonds…oh well, back to the casino…

  2. Pacioli says:

    Does this data include ETF’s? If not, it’s completely meaningless.

  3. stonedwino says:

    I hope for their own sake it’s not Mom & Pop again…you know what that would mean…

  4. nicoacademia says:

    mom and pop were broke out already from 2008.
    probably new dumb money…… cows to the slaughter.

  5. constantnormal says:

    Who’s doing the trading, after the outflows have left?

    If it is trading bots using HFT, then we are no longer in a “free market” situation, and prices are less a function of supply & demand, and more akin to cybernetic hackey-sack experts, keeping the object of their attention elevated for extended periods of time.

    We’re no longer in Kansas, Todo …

  6. constantnormal says:

    There is also the distortions from the Fed’s meddling with interest rates … another factor that moves us further away from supply-demand pricing …

  7. JTT says:

    Can someone please help me with this basis economics question (which has been bugging me for several months): if nearly half a trillion dollars has been pulled out of equity markets since 2009, why have equity prices gone up so dramatically during that time?

    If it’s due to HFT or Fed meddling (as noted above), I still don’t understand how mechanically that has resulted in higher equity prices when so much money has pulled out the equity markets.

  8. mad97123 says:

    Declining trading volume, declining funds flow, increasing prices, seem totally reasonable for these Alice In Wonderland Markets.

    The Fed is price fixing interest rates, the banks are price fixing LIBOR, why would we expect less for the stock market?

  9. Frilton Miedman says:

    ICI tracks retail/mutual funds, the dumb money.

    Where 85% of the overall market is now owned by the top 5% & largely managed by professionals, it makes a world of sense to see that each surge in dumb money precedes a market route for the last 4 years – only to be salvaged by Fed QE afterwards.

    In turn, the FED is waiting for D.C. to wake up and smell the middle class despair.

  10. perpetual_neophyte says:

    I’m with Pacioli. BR – Fitting with your theme of “ETFs are eating everything,” I think it would be a helpful clarification. I hope more people will get in the habit of explicitly distinguishing if these “equity fund” flows are open-end, ETFs, combined, etc.

  11. I believe the inflows reflect ALL equities — stocks, mutual funds & ETFs.

  12. bluefish says:

    Here’s the cause. According to the BEA Personal Income data, over $300 billion was paid out in November and December 2012 in dividends, mostly special dividends to beat the change in taxes. As a comparison, monthly dividend payouts from Jan through Oct averaged about $5 billion/month. After the Fiscal Cliff deal, guess where that money went?

    BTW, judging from the scale on the left axis, it looks like the series (bar) is only the ICI domestic equity mutual fund data (no ETFs).

  13. Frilton Miedman says:

    By admission, I haven’t checked the site in over a year, they completely changed it.

    At a glance, it looks like they now separate categories into equines, IRA, 401-K’s, closed end funds and others, but I see nothing for ETF’s ….yet.

    Last I knew, they only parsed bonds & equities into foreign & domestic.

    I’ll read more later when I have time.

  14. Angryman1 says:

    The FED hasn’t meddled with interest rates at all. If anything, they need to “really” meddle with interest rates and buy more MBS. Drive those rates higher!!!! The current level is not enough.

  15. streeteye says:


    for every seller, there’s a buyer, and yet the price can go up, or down!

    On balance, the equity market is a source of net outflows over time. And yet prices still go up!

    think of it this way, if equity returns are greater than GDP, and there are no outflows, stock market cap/GDP goes up exponentially over time.

    instead, market cap is extinguished through buybacks, mergers, and dividends.

    looking at a company lifecycle, Microsoft has bought back more dollar value of stock than it ever issued for cash.

    looking at a person’s lifecycle, as stocks go up and you eventually sell, you should get out more dollars than you ever put in.

    so, in answer to your question, for every net share sold by the mutual funds, there must have been a buyer willing to pay a higher price outside the mutual funds… the company buying back its own shares, 3rd-party acquirers, non-fund buyers like endowments, or Carl Icahn/Bill Ackman, etc., etc. Overall, not many IPOs and a lot of buybacks and mergers and dividend increases.

  16. constantnormal says:

    One more factor that I failed to mention earlier … the volume of trading in dark pools, which I doubt very much is accounted for in these figures (or even known), would have some impact on the aggregate demand … although I confess to some confusion as to how such an influence would manifest itself to contribute to the observed strangeness here.

    As I wrote earlier, we’re no longer in Kansas …

  17. carleric says:

    As volume dried up, the HFTs, quants and vodoo worshippers had more and more influence on prices….now that thoses folks who are always late to the party will set the market up for a serious correction in my humble (not) opinion….lol….

  18. Theravadin says:

    Some confusion here, between money flowing into/out of the market, and total market value. The two are not directly related – most of the market value stays in the market and sloshes around. As the market goes up, the slosh gets bigger.

  19. bgad says:

    How much of this is related to continuing share repurchase plans and decreased issuance?

  20. phillips49 says:

    Same data set from ICI shows $31.5 billion flowed into bond funds. Some “Great Rotation”!

  21. Pantmaker says:

    I wanted to say that fund flows data is mostly meaningless. Funds are simply another vehicle in which stocks can be held. Funds flow out of stock funds as the funds sell those equities to rebalanced someone or some other institution buys the equities. The stocks and the stock holders are always present. Stock pricing is determined by peoples willingness to hold stocks at certain prices (supply and demand) and maybe a case could be made that fund buying is dumb money and buying that is less concerned with price.

    The same general rules apply to bonds and bond funds. One thing to note with bond flow levels however is that there has been a massive increase in the overall issuance of bonds which all have to be owned by someone or some entity. This general increase is not “money flowing from stocks into bonds”. This new higher level of bond investment will not change until these individual bonds are retired etc.

  22. Pantmaker says:

    Sorry Barry meant to post this on how ICI calculates all of this.

    Is cash flow a measure of investors’ total demand for equities?

    Mutual fund cash flow does not measure total demand for equities. There is no established correlation between mutual fund flows and stock market activity. Mutual funds own only about 20 percent of the total U.S. equities outstanding. Larger percentages are owned directly by U.S. and foreign individual investors, domestic pension plans, and state government retirement plans. In order to measure total demand, you would need information on the activities of these investors in addition to mutual fund cash flow. Unfortunately, comparable data is not available on non-mutual fund investors.

  23. speck says:

    Of course they do. They repeat the pattern of early 2011.