Monthly Mutual Fund Report

Transcription

1 February, 199 Monthly Mutual Fund Report Statistics for December 1997 Year - End Report Sales and Redemptions Total assets for all funds increased $.7 billion, or 1.3, to $. trillion in December. Net new cash flow into the industry, a measure of the demand for mutual fund shares, was $.9 billion. The market value of the industry s assets increased by $37. billion. Total assets of equity funds increased $39.3 billion, or 1.7, to $. trillion. Net new cash flows into equity funds were $1. billion in December, compared with $1. billion in November. Total assets for bond and income funds increased $1. billion, or 1., to $1. trillion, with a net new cash inflow of $. billion in December and an increase in the market value of holdings of $1. billion. Assets of taxable and tax-exempt money market funds rose $3. billion, an increase of. and.7, respectively. In 1997, total industry assets increased $9. billion, or.9, of this increase $377.9 billion was due to net cash flows. The increase in total assets for equity funds during 1997 was $.9 billion, or 37.1 compared to 37. in 199. Of this growth, $31.3 billion, or 13., was due to net new cash flows, while in 199, 17. was due to cash flow. Bond and income funds total assets increased $1. billion, or 1.3, in 1997 with a net cash flow of., compared to 11. increase in assets in 199. Total assets of money funds increased $17.1 billion in 1997, or 17.. Liquidity Ratios Liquidity Ratios for equity and bond funds, at. and.9 respectively, remain below their historical averages of. and 7.1 (figure ). Equity funds are at their historic low and bond funds are close to their low of.. These low liquidity ratios can be attributed to several factors. In 199 settlement periods for stock and bond transactions were reduced from the business days to 3 business days, this meant that less liquidity was required to secure redemptions until cash was received from the sale of securities. Recent revisions to

2 the tax code, the elimination of the short-short law, allow investment companies to derive a greater portion of their income from assets held less than 9 days, this has enabled mutual funds to increase their options activity. A futures sale is a cash transaction and provides funds with immediate access to their assets without incurring the opportunity cost of holding cash. Banks have also been increasing their committed lines of credit to mutual funds, while simultaneously lowering their fees. Therefore, the cost of these lines of credit are now lower than alternative forms of liquidity. With increasing size, funds are able to maintain the same level of security with lower levels of liquidity as the variation in their net sales per dollar of assets declines, other things equal. Asset Composition As international and global stock market indexes fell, the share of assets held in international and global funds continued to decline (figure ) and has reached its lowest level since late Weekly Flows During January, the net cash flows into funds rose and fell commensurately with changing returns on assets (figure ). During the last week in January, equity funds, including aggressive growth, small caps, and international funds, had positive returns just under and net cash inflows between. and. Asia-Pacific funds experienced very volatile cash flows and returns in January, ending the month with cash inflows of almost of assets. Japanese funds have maintained steady cash inflows for the past three weeks, while their returns have declined, becoming negative during the last week in January. Capital Market Returns and Volatility The S&P ended 1997 at 97.3 with a total return for the year of So far in 199, the index ended January at 9. with an annualized return of 1.. The volatility for the daily returns on the S&P has increased to 1., its highest value during the most recent business cycle (figure ). Volatility and returns for the Salomon Brothers bond index remain high but stable. For more information please contact Kathryn Cosgrove (17)

3 Figure 1 Sales of Mutual New Sales billions $ billions $ Redemptions Equity Bond & Hybrid Jan-97 Mar-97 May-97 Jul-97 Sep-97 Nov-97 Jan-97 Mar-97 May-97 Jul-97 Sep-97 Nov-97 3, Total Assets billions $, Equity, 1, 1, Bond & Hybrid Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 Net New Sales/Total Assets Equity () Bond & Hybrid () Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 Source: Investment Company Institute

4 Figure Composition of Mutual ' Financial Assets ( of Total Financial Assets) Corporate Stock 3 Q1 Q1 Q1 1Q1 Q1 7Q1 7Q1 73Q1 7Q1 79Q1 Q1 Q1 Q1 91Q1 9Q1 97Q1 7 3 U.S. Government Securities and Corporate Bonds 1 Q1 Q1 Q1 1Q1 Q1 7Q1 7Q1 73Q1 7Q1 79Q1 Q1 Q1 Q1 91Q1 9Q1 97Q Municipal Securities and Miscellaneous Assets Q1 Q1 Q1 1Q1 Q1 7Q1 7Q1 73Q1 7Q1 79Q1 Q1 Q1 Q1 91Q1 9Q1 97Q1

5 Figure 3 Net Portfolio Purchases ( of Total Assets) 3 1 Net Common Stock Purchases Equity 1, 1, (1) () S&P (right scale) Bond & Hybrid (3) Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 1 Net Purchases of Other Assets 1 1-Year Bond Rate (right scale) Bond & Hybrid 1 1 () Equity () Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9

6 Figure Liquidity Ratio* 1 1 Equity 1 Bond & Hybrid Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 Equity 1 Liquidity Ratio (Left Scale) 3 1 Net New Sales / Total Assets (Right Scale) Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 (1) Bond & Hybrid 1 1 Liquidity Ratio (Left Scale) () Net New Sales/ Total Assets (Right Scale) () Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 () Source: Investment Company Institute *The Liquidity Ratio is the Percent of Total Assets held in Cash and Short-Term Securities.

7 Figure Industry Composition (Shaded Regions Indicate Periods of Rising Fed Rate) 1 Money Market Other Equity World Equity Growth & Inc. Capital Apprec. Bond and Hybrid Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 World Equity Dow Jones Global Stock Index/ Dow Jones Industrial Average (Right Scale) 3. 1 Total Assets World Equity / Total Assets Equity (Left Scale) Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 1. Capital Appreciation Total Assets Capital Appreciation / Total Assets Equity (Left Scale) Russell Stock Index/ Dow Jones Industrial Average (Right Scale) 7 3 Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 Source: Investment Company Institute

8 Figure a Weekly Flows into Mutual ( of Total Assets) () () Weekly Net Cash Flow Weekly Returns (right scale) 1//97 1//97 1/1/9 1 () (1) Equity 1. (.) 1 (1) Bond (1) 1//97 1//97 1/1/9 () 1 () () Index () 1//97 1//97 1/1/9 (1) () 1 () Aggressive Growth () 1//97 1//97 1/1/9 (1) 1 () () Small Cap () 1//97 1//97 1/1/9 (1) 1 () () 1//97 1//97 1/1/9 Source: Mutual Fund Trim Tabs () (1) Real Estate

9 Figure b Weekly Flows into Mutual ( of Total Assets) () () Weekly Returns (right scale) Weekly Net Cash Flow 1//97 1//97 1/1/9 1 () (1) International () 1 () Technology () (-1.) 1//97 1//97 1/1/9 (1) () () 1//97 1//97 1/1/9 1 () (1) Emerging Growth () () (-.7) (-13.) 1//97 1//97 1/1/9 1 () (1) Latin American 1 () 1 (1) Japan (1) 1//97 1//97 1/1/9 () 1 (19.9) () 1 (1) Pacific (ex. Japan) (1) 1//97 1//97 1/1/9 Source: Mutual Fund Trim Tabs ()

10 Figure 7 Net New Sales By Investment Objective (Shaded Regions Indicate Periods of Rising Fed Rate) 1, Equity billions $ 1, S&P Price Index (Left Scale) Total Equity Net New Sales (Right Scale) 3 1 Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 (1) Bond & Hybrid 1 billions $ 1 1 Net New Sales (Right Scale) Year Bond Rate (Left Scale) Jan- Jan- Jan- Jan-9 Jan-9 Jan-9 Jan-9 () (1) Source: Investment Company Institute

11 Figure Capital Market Returns and Volatility S&P Daily Returns and Volatility 1-year average Returns year average Volatility (right scale) () Salomon Brothers Bond Index 1 1-month average Returns month average Volatility (right scale) () Jan-9 Jan-9 Jan-91 Jan-9 Jan-93 Jan-9 Jan-9 Jan-9 Jan/97 Jan/9

12 Figure 9 S&P Price-Earnings Ratios S&P Smallcap S&P 199:Q1 19:Q1 19:Q1 19:Q1 1971:Q1 197:Q1 1977:Q1 19:Q1 193:Q1 19:Q1 199:Q1 199:Q1 199:Q1 S&P Price-Operating Earnings Ratio -qtr Trailing Earnings 1 1 -qtr Forward Earnings 19:Q1 197:Q1 197:Q1 197:Q1 197:Q1 197:Q1 19:Q1 19:Q1 19:Q1 19:Q1 19:Q1 199:Q1 199:Q1 199:Q1 199:Q1 3 S&P Price Earnings Ratio and the Growth of Earnings yr Growth of Earnings* (right scale) Price-Earnings Ratio () 199:Q1 19:Q1 19:Q1 19:Q1 1971:Q1 197:Q1 1977:Q1 19:Q1 193:Q1 19:Q1 199:Q1 199:Q1 199:Q1 () * Growth of earnings over subsequent quarters. Current observations use forecast of earnings from macro projections. source: First Call, DRI, Bloomberg

13 Figure 1 1 Real Rate of Return on Nonfinancial Corporate Equity (from National Income and Flow of Accounts) Tobin's Q* :Q1 197:Q1 19:Q1 197:Q1 197:Q1 1977:Q1 19:Q1 197:Q1 199:Q1 1997:Q1 1 Profits of Nonfinancial Corporations ( of GDP) 1 Earnings Before Interest Payments Profits 19:Q1 193:Q1 19:Q1 1973:Q1 197:Q1 193:Q1 19:Q1 1993:Q1 * Market Value of Equity plus Net Interest Bearing Debt/ Current value of Land, Inventories, Equipment, and Structures