With the odds of a third U.S. rate hike this year being priced by the market at over 95 percent and a string of events reminding investors of the political risks associated with developing countries, EPFR-tracked Emerging Markets Equity and Bond Funds have been searching for love in a cold climate recently. Emerging Markets Equity Funds, which averaged inflows of $1.9 billion a week during the second and third quarters, have seen that average drop to below $1 billion since the beginning of 4Q17 and to zero during the three weeks ending November 8. Meanwhile, the latest flow into Emerging Market Bond Funds was the smallest since they last experienced net redemptions during the second week of August.
Diversification, either geographic or across asset classes, remains the key to attracting fresh money. During the first week of November Global Equity Funds took in over $4 billion for the 11th time in the 45 weeks year-to-date and flows into Global Bond Funds climbed to a six-week high while both Balanced and Total Return Bond Funds pulled in over $1 billion.
Overall, the seven days ending Nov. 8 saw a net $6.4 billion flow into all EPFR-tracked Bond Funds and $25 billion into Money Market Funds. Commitments to Equity Funds totaled $3.8 billion with Dividend Equity Funds recording their second weekly inflow of 4Q17 thanks to the second largest flows into Europe Dividend Funds since early 2Q15.
At the asset class and single country fund levels, redemptions from Bank Loan Funds hit an 11-week high, High Yield Bond Funds posted consecutive weekly outflows for the first time since mid-August and flows into Inflation Protected Bond Funds climbed to their highest level in 13 weeks. Among Country Fund groups, Germany and Mexico Equity Funds recorded their biggest inflows since mid-August and late July respectively while redemptions from Turkey Equity Funds were the biggest in over 19 months.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.