A week that began with investors digesting the U.S. Federal Reserve’s latest 0.25 percent rate hike, and ended with MSCI’s decision to include Chinese ‘A" shares in its benchmark emerging markets index, saw moderate flows to EPFR Global-tracked Equity and Bond Funds. Equity Funds, which took in a 31-week high of $24.5 billion during the second week of June, failed to break the $1 billion mark during the seven days ending June 21. Flows into all Bond Funds were over $3 billion lower than the previous week's tally.
While the Fed’s action was widely anticipated, its accompanying assertion that it expects to hike rates again this year and implement a program for trimming its balance sheet have given investors pause for thought. U.S. Bond Funds extended an inflow streak stretching back to the third week of March, but commitments fell to their lowest level since that run began, and U.S. Equity Funds recorded their sixth outflow in the past eight weeks. But Emerging Markets Equity and Bond Funds attracted more money and Bank Loan Funds, generally viewed as a way to play rising U.S. interest rates, recorded outflows for the first time since early November.
Asia ex-Japan Equity Funds posted their biggest inflow since early in the third quarter of 2015. But it was the outlook for semiconductor prices and the reform stories in Korea and India, rather than MSCI’s move on China, that drove the flows.
Overall, EPFR Global tracked Bond Funds took in a net $5 billion in the third week of June. Equity Funds just $523 million while Money Market Funds saw over $20 billion redeemed for the second week running and Alternative Funds recorded their biggest outflow since mid-December.
At the single country fund level, France Equity Funds recorded their second highest weekly inflow year-to-date, flows into Greece Equity Funds jumped to levels last seen in the second quarter of 2015, and outflows from Italy Equity Funds climbed to a 16-week high. Among Emerging Markets Country Fund groups, redemptions from South Africa and Russia Equity Funds hit 11 and 14-week highs, respectively, while Argentina Equity Funds posted their biggest inflow since fall of 2013.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.