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FUND FLOWS: Japan Leads Developed Equity Funds While U.S. Redemptions Continue

Japan and global equity funds led to the ninth straight week of inflows for developed markets, but investors are still sour on U.S. funds

The biggest inflow for Japan Equity Funds in five months and further commitments to Global Equity Funds enabled EPFR-tracked Developed Markets Equity Funds to record inflows for the ninth straight week. That came despite the snapping of Europe Equity Fund’s eight-week inflow streak and the 10th straight week of net redemptions from U.S. Equity Funds.

Caution ahead of ECB President Mario Draghi’s address to the U.S. Federal Reserve’s Jackson Hole summit, the growing resistance to France’s new, reformist president, concerns about the impact of the euro’s recent strength on export competitiveness and a German general election now only a month away gave investors looking at Europe plenty of reasons to step back during the third week of August. Redemptions from Europe Regional Funds hit a 16-week high and France Equity Funds saw their nine-week run of inflows come to an end.

While a stronger euro should bolster the Eurozone’s appetite for Swiss exports, Switzerland Equity Funds posted outflows for the 21st time in the past 25 weeks as investors continue to sell into a rising market.

Redemptions from U.S. Equity Funds once again fell most heavily on actively managed funds, with all nine of the major capitalization and style sub-groups recording outflows for the week. Among U.S. Equity ETF groups, Large and Small Cap Blend ETFs posted the biggest inflows and Mid Cap Blend ETFs the biggest outflows. Funds with socially responsible (SRI) and dividend stock mandates experienced net redemptions for the fourth and sixth straight weeks respectively.

Japan Equity Funds absorbed fresh money for the eighth consecutive week, with the latest inflows the biggest since late March, as the country’s benchmark equities index–the Nikkei-225–flirted with negative territory year-to-date. Yen-denominated flows to domestically domiciled Japan ETF’s accounted for the bulk of the headline number. Three of the four biggest recipients of fresh money where dedicated to the TOPIX index.

The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, maintained their unbroken streak of inflows with ex-U.S. funds taking in over eight times the amount of fresh money that flowed into funds with fully global mandates.

Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.

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