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FUND FLOWS: Europe Equity Funds Shake Off Populist Shackles

The election of France’s new centrist President and Merkel’s poll numbers spark record inflows.

With centrist Emmanuel Macron set to become France’s president and German Chancellor Angela Merkel’s poll numbers improving ahead of Germany’s general election later this year, investors are starting to believe that populism in Europe has crested. The week ending May 10 saw EPFR Global-tracked Europe Equity Funds post record inflows while Europe Bond Funds recorded consecutive weekly inflows for the first time since mid-January. Global ex-U.S. Equity Funds, whose average allocation to Developed Europe stands at 53 percent, also enjoyed record-setting inflows.

The latest bout of political sound and fury in the U.S. tied to President Donald Trump’s firing of FBI Director James Comey weighed on U.S. Equity Funds, which posted outflows for the sixth time in the past eight weeks. However, it also casts further doubt on Trump’s ability to translate his protectionist agenda into law. Investors committed a combined $3.6 billion to Emerging Markets Equity and Bond Funds

Overall, investors steered $8.7 billion into EPFR Global-tracked Equity Funds during the week ending May 10 while Bond Funds took in $4.4 billion and Money Market Funds over $14 billion. Flows into Dividend Equity Funds hit an eight-week high as they took in fresh money for the sixth week running.

At the asset class and single country fund level flows were at some of their highest in years. Equity flows into Italy and Greece were at their highest since the fourth and second quarters of 2015, respectively. Meanwhile equity fund flows to Portugal reached levels that hadn’t been seen since the third quarter of 2014, and levels in France reached a high not seen since the third quarter of 2011. Inflation Protected Bond Funds snapped a three-week run of outflows and Total Return Bond Funds recorded inflows in excess of $1 billion for the seventh time in the past nine weeks.

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

TAGS: Mutual Funds
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