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FUND FLOWS: Concerns Over Frothy Markets Not Stopping Investors

Signs that investors were concerned about rising rates and expensive stock valuations are scant as flows into equity and bond funds continue pacing upwards.

Signs that investors are concerned about rising US bond yields and expensive equity valuations were thin on the ground during the first full week of 2018, as flows into equity and bond funds surged to 30 and 31-week highs respectively.

The week ending Jan. 10 also saw Emerging Markets Equity and Bond Funds record their biggest inflows since 2016, flows to High Yield Bond Funds hit a 25-week high and Global Equity Funds posted their third record inflow since the beginning of the third quarter, as investors moved off the sidelines after the Christmas and New Year's holidays.  

Investors continued to keep their distance from funds dedicated to Italy, China, and the U.S.'s two NAFTA partners, Mexico and Canada. But they increased their exposure to other markets with geopolitical baggage.

Korea Equity Funds absorbed fresh money for the ninth week running, commitments to Russia Equity Funds climbed to a 14-week high and Greece Equity Funds recorded their biggest inflow since the middle of last year.

Overall, Equity Funds posted a collective inflow of $24.4 billion during the seven days ending Jan. 10 while Bond Funds took in $13.7 billion and Money Market Funds $21.4 billion.

At the single country and asset class fund levels, High Yield Bond Funds took in over $1 billion for the first time since early October, Mortgage Backed Bond Funds snapped their longest outflow streak in nearly a year and commitments to Municipal Bond Funds hit a 13-week high. Italy Bond Funds recorded their biggest weekly outflow since 2Q17, Italy Equity Funds experienced net redemptions for the sixth straight week and China Bond Funds extended a run of outflows that started in mid-November.

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

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