EPFR Global-tracked Developed Markets Equity Funds boosted their YTD inflow total by another $7 billion during the week ending Feb. 22 despite the confusion surrounding U.S. President Donald Trump’s fledgling administration, and the fears that the electoral math in France is changing in favor of National Front Candidate Marine Le Pen. Set against the political and policy concerns are decent macroeconomic numbers for U.S. employment, Eurozone GDP growth, and Japanese corporate profits.
The latest flows into Europe Equity Funds were the largest in over a year. “Our fund flow data shows that institutional investors have been buying into the equities rally that started in the middle of last year for over three months now,” observed EPFR Global Research Director Cameron Brandt. “Retail investors are still keeping their distance,” he said.
Political risk remains the biggest reason that retail investors are reluctant to chase these gains. The euro-skeptic Party for Freedom holds a narrow lead in the polls ahead of the Netherland’s general election next month while the establishment candidate in France’s presidential election the following month is fighting for his political life. Investors are, however, still responding to Spain’s growth and reform story with flows into Spain Equity Funds climbing to a 22-month high.
Both yen and foreign currency denominated flows to Japan Equity Funds were positive during the third week of February. For Japanese investors looking beyond their home market, Australia and EMEA Equity, Alternative and U.S. Bond Funds lead the way so far this year when it comes to attracting their money.
Flows into U.S. Equity Funds picked up during the final day of the reporting period, but with many domestic investors enjoying a holiday weekend, came in at less than half the previous week’s total. Small Cap Funds recorded the biggest inflows, both in cash and flows as a percent of AUM terms, during a week when funds managed for growth outperformed their value counterparts across all capitalizations. Actively managed Small Cap Value Funds attracted fresh money for the seventh straight week, their longest such run since 2Q13.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.