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FUND FLOWS: Record-High U.S. Equity Markets Pushed Inflows to Developed-Market Funds

U.S. investors are growing numb to geopolitical tensions and are now weighing the likelihood of a Fed rate increase.

Record-high equities drove inflows last week in all four of the major developed-market equity fund groups tracked by EPFR.

Investors in the U.S. appear to be growing numb to geopolitical tensions, and the turbulence of the Trump presidency. Dips in the market after North Korea conducted missile tests have been seen as buying opportunities. What investors are really weighing is monetary policy, especially the likelihood the Federal Reserve will pull the reins and announce another rate hike before year end. The U.S. Federal Reserve and the Bank of Japan meet this week.

In the week ending September 13, U.S. Equity Funds posted second consecutive inflows, which they hadn’t done since March of this year. Small Cap Blend Funds led the way in both cash and flows as a percentage of AUM terms, according to EPFR.

The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, recorded their 39th straight inflow, with ex-U.S. funds attracting the bulk of the fresh money.

Meanwhile, retail investors were net redeemers for the 11th straight week and the 36th time in the 37 weeks year to date. U.S. Equity Funds with socially responsible (SRI) mandates also saw their two-week run of inflows snapped, and U.S. Dividend Equity Funds posted their ninth consecutive weekly outflow.

Beyond Developed Equity Markets

North Korea’s missile tests haven’t turned investors away from Asia, either. China's emphasis on financial stability and recent data is attracting investors China Equity Funds extended their longest run of inflows since the fourth quarter of 2015, Korea Equity Funds attracted another $350 million, and Japan Equity Funds recorded their biggest inflow since mid November.

Elsewhere in Canada and the Eurozone, where monetary policy is looking hawkish, investors were less enthusiastic. Redemptions from Canada Equity Funds jumped to a 50-week high, U.K. Equity Funds posted their biggest outflow in 13 weeks, and Europe Country Funds dedicated to the more indebted Eurozone markets struggled to attract fresh money, according to EPFR.

Commodities funds extended their longest streak since the first quarter of this year. According to EPFR analysts, investors are looking past prices and at potential gains due to stronger Chinese demand in 2018 coupled with tighter supply.

Monetary policies and other factors helped Global Bond Funds last week, which recorded inflows for the 36th time in the 37 weeks year to date. Emerging Markets Bond Funds attracted over $1 billion for the fourth week running.


Fund flows data provided by Cameron Brandt, director of research for EPFR Global, an Informa Financial Intelligence company.

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