With the latest round of central bank meetings done and dusted, and French voters delivering the best-case scenario, investors continued to reduce their exposure to precious metals and commodities during the third week of June. They also moved back into some of the less-popular Sector Fund groups, with EPFR Global-tracked Real Estate Sector Funds recording their biggest inflow since early March as they snapped a 10-week outflow streak, and Health Care/Biotechnology Sector Funds extending their longest run of inflows since mid fourth quarter 2016.
Investors pulled over $1 billion out of all Commodities Sector Funds for the second time year-to-date, with dedicated Gold Funds accounting for around half of the headline number, as higher U.S. interest rates, doubts about China’s appetite and soft prices sapped investor appetite for this asset class. Energy Sector Funds, however, attracted nearly $1 billion despite the latest drop in crude oil prices.
Also experiencing net redemptions were Technology Sector Funds, which saw a record-setting 15-week inflow streak come to an end as investors booked profits and took another look at dividend-paying stocks with Utilities Sector Funds absorbing over $600 million during the week. EPFR’s new Stock Allocations data set shows that fund managers have nearly doubled their exposure to the four FANG (Facebook, Amazon, Netflix and Google) technology stocks since 2014.
The rebound in flows to Real Estate Sector Funds favored those with U.S. and European mandates. By some measures, U.S. house prices are at or above their pre-financial-crisis highs, and investors appear to be discounting the Fed’s signals that another interest rate hike and a reduction in its holdings of mortgage-backed securities will occur in the second half of the year.
Cameron Brandt is director of research for EPFR Global, an Informa Financial Intelligence company.