EPFR Global-tracked Developed Markets Equity Funds posted their biggest outflow since early 3Q16 during the week ending April 5 as redemptions from U.S. Equity Funds hit their highest level in nearly 10 months. Fears that the reflation and deregulation agenda promised by U.S. President Donald Trump may fall victim to the same divisions within the Republican party that undermined the administration’s recent health care push prompted investors to reassess a market that, by some measures, is richly valued.
Among those concerned by current U.S. valuations are members of the Fed’s Open Markets Committee, with the minutes of the FOMC’s March meeting noting that “some standard measures of valuations [that are] above historical norms.” Both actively and passively managed U.S. Equity Funds experienced net redemptions, with Mid-Cap Growth and Large-Cap Value ETFs the only major sub-groups to post inflows. Funds with social responsible (SRI) mandates did attract fresh money for the sixth time in the past nine weeks and yen-denominated flows to U.S. Equity Funds were positive for the first time since early January.
Flows into Japan Equity Funds, meanwhile, were the smallest since their current inflow streak started during the second week of the year. There was a marked drop-off in yen-denominated flows to this fund group but foreign currency flows were positive for the first time in four weeks.
YTD Japan is the developed market that has attracted the most net buying, both in cash terms and relative to existing holdings, from all EPFR Global-tracked Equity Funds reporting weekly.
Among European markets, Germany has seen the greatest interest in cash terms and Norway in flows as a percent of AUM terms. When it comes to European country exposure, investors remain leery of Italy and France — France and Italy Equity Funds posted outflows 10 of the first quarter’s 13 weeks — and have pulled out of U.K. Equity Funds since the country’s government initiated the two-year process for leaving the European Union with the latest week’s redemptions being the largest since mid-October.