Informa Intelligence
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FUND FLOWS: Equity Investors Look Outside U.S. After Correction

There is renewed interest in Europe, Japan and emerging markets.

Flows to EPFR-tracked Equity Funds continued to rebound going into the final week of February as attention shifted from the correction which hammered global equity markets earlier in the month to the U.S. Federal Reserve's take on the forces—rising wages and prices—that were credited with triggering the sell-off. 

Equity investors again looked to Europe, Japan and emerging markets and, at the country level, showed renewed interest in some markets that have struggled recently. Italy Equity Funds snapped their longest run of outflows since the third quarter of 2016, commitments to Brazil Equity Funds hit a nine-week high and Mexico Equity Funds extended their longest inflow streak since the end of 2015.

Overall, EPFR-tracked Equity Funds saw $13.2 billion come in during the week ending Feb. 21 while Bond Funds absorbed $5.1 billion and Money Market Funds $2.5 billion. Investors pulled another $600 million out of Alternative Funds, with funds dedicated to derivatives, accounting for the biggest share of those redemptions.

Flows to U.S. Bond Funds—at least until the release of the January meeting minutes—suggested that fixed income investors were betting against an increase by the Federal Reserve in its rate hike projections for 2018. Bank Loan Funds, often used to pay rising rates, posted consecutive weekly outflows for the first time this year while Inflation Protected Bond Funds posted inflows for the 18th straight week.

Elsewhere, at the asset class and single country fund levels, Mortgage Backed Bond Funds absorbed fresh money for the seventh straight week and flows to both Municipal and Total Return Bond Funds rebounded. Investors pulled money out of Russia Bond Funds for the 25th time in the past 26 weeks. Italy Bond Funds saw an eight-week run of outflows come to an end and Netherlands Equity Funds recorded their biggest inflow since late in the third quarter of 2015.

 

Fund flow data provided by EPFR Global, an Informa Financial Intelligence company.

 

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