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FUND FLOWS: Sector Funds Turn Defensive

Utilities and energy taking in new money, even as fund managers doubt rally in oil prices is sustainable.

Flows for EPFR Global-tracked Sector Funds took a turn for the defensive during the week ending Feb. 8 as investors paid closer attention to the outlook sections of key fourth quarter corporate earnings reports. Utilities Sector Funds posted their biggest inflow since late 2Q16 as they snapped a four-week run of redemptions, flows into Healthcare/Biotechnology Sector Funds hit a 12-week high and Gold Funds took in over $1.5 billion.

Among the other groups attracting fresh money were Energy Sector Funds, which pulled in over $350 million in spite of the attention a sharp drop in U.S. gasoline deliveries attracted. Although oil prices are holding north of $50 a barrel many fund managers are doubtful the rally in oil prices will be as strong as predicted. Average allocations to energy plays have, with the notable exception of Latin America Equity Funds, moved largely sideways since bottoming out early last year.


Elsewhere, investors are still trying to work out what President Donald Trump’s vision for U.S. health care is and how it will effect key players in the sector. Plans to roll back the ObamaCare reforms, cap drug prices and allow Medicaid to negotiate with suppliers all pose threats to current business models. Still, some investors are betting that any benefits from proposed tax reforms and a repatriated profits program will show up ahead of these potential headwinds.

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


TAGS: Mutual Funds
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