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FUND FLOWS: Investors Send New Money to Non-U.S. Developed-Markets Equities

Money continues to trickle out of U.S. equity funds; European funds were the biggest winners.

Flows for EPFR-tracked developed-markets equity funds during the week ending August 9 stuck to the script in place since mid-July. For the fourth straight week, U.S. equity funds recorded modest outflows while investors committed fresh money to Global, Europe and Japan

Equity funds: of the four major groups, only Europe equity funds attracted any fresh money from retail investors.

Europe equity funds, which at this point last year were posting their 27th consecutive weekly outflow, recorded their fifth-straight inflow and 19th in the past 20 weeks, as the populist forces that roiled the continent in 2016 remain subdued and economic numbers continue to improve. Unemployment in the European Union is currently at an eight-year low, second-quarter earnings for European companies are generally solid, and business confidence in Europe's biggest economy, Germany, is by some measures at record highs.

Domestic investors are rediscovering their "home bias," with euro-denominated flows to Europe equity funds continuing their strong rebound.

Among the beneficiaries of this improving sentiment are Italy equity funds, which recorded their biggest inflow since early May against a backdrop of higher GDP forecasts, a stock market up some 13 percent year to date, and the seemingly successful rescue of three regional banks.

Flows to Japan equity funds climbed to an eight-week high during the first week of August. Yen-denominated flows accounted for all of the week's headline numbers, with most of that money going to ETFs rather than actively managed funds.

Actively managed U.S. equity funds also struggled to attract fresh money, collectively posting their 37th consecutive weekly outflow. So far this year they have modestly outperformed U.S. ETFs overall, with the biggest gap in performance between actively managed funds and ETFs evident among small- and mid-cap growth funds.

Global equity funds, the largest of the diversified developed-markets equity fund groups, recorded inflows for the 34th consecutive week as their year-to-date total moved close to the $100 billion mark.

Cameron Brandt is director of research for EPFR Global, an Informa Financial Intelligence company.

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