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FUND FLOWS: Investors Turn From U.S. Equities

Commitments to global and Japanese equity funds failed to offset $9 billion redeemed from U.S. and Europe.

EPFR Global-tracked Developed Markets Equity Funds saw their longest inflow streak since later 2015 come to an end during the week ending March 22 as commitments to Global and Japan Equity Funds failed to offset the over $9 billion redeemed from U.S. and Europe Equity Funds.

Concerns that President Trump’s focus on wiretapping allegations and fake news is distracting his administration, thereby wasting what is normally the period when a new president’s legislative agenda stands the best chance of progressing, weighed on U.S. equity markets and U.S. Equity Funds. Retail redemptions, which hit their highest level in over 13 months the previous week, moderated. But Large Cap Value Funds were the only sub-group that managed to attract fresh retail money.

On the heels of an election result in the Netherlands that saw the ambitions of the main populist party, firmly checked flows for Europe Equity Funds remained negative; although the second biggest weekly outflow on record from Switzerland Equity Funds had a significant bearing on the headline number for all funds.

France Equity Funds did attract fresh money for only the third time YTD. Italy Equity Funds also posted inflows despite the growing consensus that the biggest fault line in the Eurozone runs through its third largest economy. As Marcus Dewsnap, a senior analyst at EPFR Global’s sister company IGM pointed out in a recent note, while European Union leaders prepare to celebrate the 60th anniversary of the signing of the Treaty of Rome, the debt dynamics of the country Rome sits in continue to deteriorate and bank lending to private businesses has faltered again.

While Japan’s debt dynamics are, by some measures, the worst in the developed world, equity investors are focusing instead on the latest round of economic reforms moving through the Japanese legislature and the Bank of Japan’s sustained efforts to rekindle inflation and growth. Over $2 billion, most of it yen-denominated, flowed into Japan Equity Funds as they extended their longest inflow streak since 2Q15.

The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, saw YTD inflows move north of the $32 billion mark.


Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.

TAGS: Mutual Funds
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