EPFR-tracked Developed Markets Equity Fund flows during the week ending Aug. 2 followed the previous week’s pattern, with U.S. Equity Funds recording outflows while Europe, Japan and Global Equity Funds attracted fresh money. The flows into Global Equity Funds were the smallest since late March and the redemptions from U.S. Equity Funds the biggest since early July.
Investors looking to Europe again favored diversified over single country exposure. Flows to Europe Country Fund groups ranged from an outflow of $51 million for U.K. Equity Funds to a $109 million inflow for Germany Equity Funds while Europe and Europe ex-U.K. Regional Funds attracted more than $1.1 billion. Managers of Europe Equity Funds are, on average, allocating a third of their portfolios to the industrial and financial sectors, with allocations to the latter at an 18-month high coming into the third quarter.
Japan Equity Funds recorded solid inflows for the third straight week that included retail commitments for only the second time since mid-April. Once again, yen-denominated flows accounted for the bulk of the headline number. Foreign investors have pulled back in recent weeks as Prime Minister Shinzo Abe’s declining popularity raises questions about his ability to keep pushing structural and fiscal reforms.
Year-to-date Japan has seen the biggest inflows from EPFR-traced Equity Funds in cash terms and the fourth biggest in flows as a percentage of AUM. Roughly a third of those overall flows have come from Global Equity Funds, whose average allocation to Japan is over 10 percent.
Flows for U.S. Equity Funds favored those with small cap mandates, which recorded their biggest inflow since the second week of June. That was not enough, however, to offset redemptions from Large and Mid-Cap Funds. A survey of Hedge Fund managers by EPFR sister company TrimTabs Investment Research found the percentage of managers with a bearish outlook for U.S. stocks is at its lowest level since the second quarter of 2014.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.