Long-term mutual funds saw weakness in asset flows, a report notes, as asset outflows occurred across the board with the exception of domestic taxable fixed income funds.

Mutual funds with interest rate exposure particularly hit

Driven by emerging market exposure, international equity-based mutual funds were hit by asset outflows for the first time in six months, a research note from Morgan Stanley (NYSE:MS) points out.  Outflows from domestic equity funds also gained speed, as ETFs posted outflows primarily driven by bond funds.

It was volatility that was, in part, to blame for international equity funds witnessing their first negative outflows since January, a time when heavy volume out of emerging market funds had more than compensated for inflows to global domestic funds. Domestic equity weakness had accelerated as was wide spread in all equity categories, from large to small cap, the report, written by Betsy Graseck, Michael Cyprys and Sean Haydon, noted.

Balanced mutual funds were not entirely in balance as asset outflows occurred for the third time in the previous four weeks while municipal bond mutual funds “quietly” posted outflows for the 11^th week out of 13 weeks. ValueWalk had previously noted weaker expectations for bond asset flows entering the second half of 2015. The investors exiting out of bond funds also hit international taxable fixed income managers, the report noted, although “just barely,” as outflows slightly bested inflows on a week over week basis.

Money market funds and domestic taxable fixed income large and modest net inflows respectively while net outflows hit domestic equity, balanced funds, intermational equity, munis and international taxable fixed income all posted net outflows.

ETFs hold up well on a relative basis

Mutual funds and ETFs slightly diverged in the study. Bond ETFs, which had been exhibiting a relative degree of asset stability, exhibited negative outflows the past week, the first time in five weeks. Equity focused ETFs, meanwhile, posted small asset gains.

In looking at funds breakdown based on client category, funds with the most retail of clientele included Calamos Asset Management, with 89 percent retail investors, and Virtus Investment Partners, with 88 percent retail. The most institutional of all fund managers was BlackRock, Inc. (NYSE:BLK), with 77 percent of investors institutional, followed by Legg Mason Inc (NYSE:LM), with 72 percent of its investors institutional.