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FUND FLOWS: Redemptions Continue For U.S. Equity Funds

Investors flee U.S. equity and inflation-protected funds as Trump’s agenda stumbles.

Europe Equity Funds started the second quarter of 2017 by posting consecutive weekly inflows for the first time since late February. U.S. Equity Funds, meanwhile, recorded their biggest outflow since late-3Q15 as investors continue to adjust their perceptions for economic growth, political stability and relative valuations in Europe and make comparisons with the U.S., where President Donald Trump’s administration is still trying to get its bearings and struggling to advance its reflationary economic agenda.

The perception that Trump’s promises will take some time to materialize — if at all — prompted investors to downgrade the threat of inflation, with Inflation Protected Bond Funds posting their first weekly outflow year-to-date, and look for alternatives to U.S. equities. Fund groups with geographically diversified mandates remained popular: flows into Global Equity Funds, which recorded their biggest quarterly inflow since 3Q15 between January and March, hit a 33-week high, Global Emerging Markets (GEM) Equity Funds took in fresh money for the 13th consecutive week and Global Bond Funds absorbed over $1.8 billion for the third week running.

Overall, the week ending April 5 saw investors commit a net $12.4 billion to all EPFR Global-tracked Bond Funds and $14.5 billion to Money Market Funds. They redeemed a collective $7.4 billion from Equity Funds, which ended the previous month having chalked up their biggest quarterly inflow since 4Q13.

At the asset class and single country levels, redemptions from Mortgage Backed Bond Funds hit a 13-week high and High Yield Bond Funds recorded their biggest inflow since December. South Africa Equity and Romania Bond Funds experienced their biggest net outflows in 46 and 92 weeks respectively, commitments to Malaysia Equity Funds hit levels last seen in 3Q11 and Netherland Equity Funds recorded their largest inflow in over a year.

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

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