Outflows from municipal bond mutual funds may be coming to an end, depending on where one looks for U.S. fund flow numbers.
Muni bond funds had net outflows of $108 million in the week ending May 18, according to Lipper FMI. But muni bond funds saw $38 million of inflows for the week ending May 11, according to the most recent numbers available from the Investment Company Institute.
Both numbers demonstrate that investors have more interest in and less anxiety about municipal bonds, according to Tim Pynchon, a portfolio manager at Pioneer Investments whose fund invests in high-yield municipal bonds. His firm follows Lipper numbers for both all funds and high-yield municipal bond funds.
“It’s still a good sign,” he said. “It’s the idea that we’re experiencing a slow but steady thaw from the very negative sentiments that have enveloped our marketplace for the last six months. This also tells me that slowly but surely we’re seeing the re-engagement of the retail investor back into our marketplace.”
Last week’s Lipper numbers, when investors withdrew just $95 million from muni funds, looked as though the market was finally primed for a week of positive inflows.
But instead, this week marked the 27th in a row that investors pulled money out of funds that report their flows weekly to Lipper.
Still, the pace of money leaving municipal bond funds remained at a relative trickle. Just two weeks earlier, investors withdrew nearly $800 million.
Assets for funds that report weekly climbed to $316 billion, up from $314.1 billion in total assets in the week ended May 11. The value of the funds’ holdings rose by almost $2.1 billion as prices continue to climb for munis due to a scarcity in new-issue supply.
It was the seventh week in a row that net-asset values gained.
Among municipal bond mutual funds that report weekly, the four-week moving outflow average was down to $395.6 million from $680.7 million the week before.
Likewise, muni funds saw outflows of $275 million the week of May 4, according to ICI data. That is down from the $1.1 billion of outflows it saw for two week in April. And it is a considerable improvement from the $5.7 billion investors pulled out of muni bond funds during the week of Jan. 19.
ICI says its weekly cash flows are estimates that are adjusted to represent industry totals. They are based on reporting covering 95% of industry assets. For its methodology, Lipper says it surveys 1,577 mutual funds over a weekly period.
Regardless of which numbers are used, the data represent part of a rising tide of positive sentiment across the municipal market, according to Pynchon.
“We’re starting to see a formation of a very positive outlook for our marketplace,” he said.
“Value is winning out, both on an absolute and on a relative basis, to other asset classes. And the fundamentals have largely been there, with the exception of some problem areas,” Pynchon said. “So some investors slowly but surely are starting to recognize that value, combined with the tax-exempt nature of our product, makes for a very attractive case to come back to the asset class.”
