Both fixed income and equity investors opted for diversified exposure in late September as they assessed Europe’s changing political landscape, weighed the latest remarks by U.S. Fed Chair Janet Yellen and waited for U.S. President Donald Trump to unveil his administration’s long-awaited blueprint for tax reform. Flows into EPFR-tracked Global Equity Funds–which have yet to post an outflow this year–climbed to a nine-week high while commitments to Global Bond Funds hit levels last seen in mid-second quarter of 2014.
Among Europe Equity Country Fund groups, flows mirrored to an unusual degree the latest political currents during the week. French President Emmanuel Macron articulated a vision for the continent while German Chancellor Angela Merkel weighed her coalition options and Spain’s leadership wrestled with an impending referendum on Catalan independence. France Equity Funds recorded their biggest inflow since the third quarter of 2011, while Germany Equity Funds posted outflows for the fourth time in the past five weeks and redemptions from Spain Equity Funds climbed to a 59-week high.
Emerging Markets Equity and Bond Funds retained their luster for investors despite the background noise generated by North Korea, the Iraqi Kurd’s latest push for independence and China’s recent ratings downgrade. Municipal Bond Fund flows displayed a similar immunity to Puerto Rico’s woes and the possibility Hartford may be the next big municipal issuer to default.
Overall, the week ending Sept. 27 saw EPFR Global-tracked Bond Funds post collective inflows of $8.7 billion while a net $2.1 billion flowed out of Equity Funds and over $5 billion from Money Market Funds. Redemptions from Europe Money Market Funds climbed to a 13-week high.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.