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FUND FLOWS: Developed Market Equity Funds See Outflows

Political volatility in both the U.S. and U.K. had caused investors to think twice about developed markets.

With British and French voters heading to the polls during the second week of June and U.S. President Donald Trump’s economic agenda still heading nowhere, investors pulled more money out of U.S. Equity Funds and moderated their commitments to Europe Equity Funds during the seven days ending June 7. 

Although U.K. Equity Funds endured another week of heavy redemptions ahead of the June 9 election, Europe Equity Funds overall posted net inflows for the 11th straight week as funds with broad regional mandates continue to soak up fresh money. Investors were generally cautious about taking on single country exposure, although France Equity Funds did see inflows hit a four-week high thanks to reformist tone of new President Emmanuel Macron and expectations that his En Marche party will win a majority during the two-rounds of legislative elections on June 11 and 18.

Among the Europe Country Fund groups that also attracted fresh money were Italy Equity Funds, which snapped a three-week inflow steak, and Austria Equity Funds which recorded inflows for the 18th time in the 26 weeks since its brush with populist politics ended with Alexander van der Bellen’s defeat of Norbert Hofer in last December’s presidential election re-run.

Japan Equity Funds, meanwhile, struggled as flows maintained their inverse relation to the strength of Japan’s currency and its implications for Japanese exporters. The yen gained ground during the week against the U.S. dollar as investors worried that former FBI Director James Comey’s testimony before the U.S. Senate on June 9 could further weaken an already flailing Trump administration. A bounce in the benchmark Nikkei 225 index in early June also offered investors the chance to take profits.

Fears that Comey’s testimony will create fresh distractions for the new administration also weighed on U.S. Equity Funds, which experienced outflows for the fifth time in the past six weeks as retail investors pulled money out of this fund group for the 28th consecutive week. Actively managed funds absorbed the bulk of the redemptions, with U.S. ETFs collectively posting modest inflows a little in excess of $400 million.

The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, saw their year-to-date inflow tally move past the $60 billion mark. Flows, which have tilted towards funds with ex-U.S. mandates in recent weeks, were more evenly divided between Global and Global ex-U.S. Funds.

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

TAGS: Mutual Funds
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