The week ending May 17 saw two EPFR Global-tracked Sector Fund groups — Real Estate and Financial Sector Funds — post outflows in excess of $1 billion as investors reassessed the outlook for U.S. President Donald Trump’s agenda and looked ahead to next month’s meeting of the Federal Reserve. But, with the exception of Technology Sector Funds, flows to most of the other fund groups lacked the same conviction, ranging from an outflow of $86 million for Consumer Goods Sector Funds to an inflow of $111 million for Commodities Sector Funds.
Redemptions from Real Estate Sector Funds hit levels last seen late in the second quarter of 2013 when fears that U.S. monetary policy would tighten in the second half of the year prompted fixed income, real estate and emerging markets investors to head for the exits. Headwinds, ranging from the U.S. Federal Reserve’s tightening bias through the struggles of conventional retailers to uncertainty about the impact of proposed tax reform, have sapped investor enthusiasm for this asset class since the final quarter of 2016.
Meanwhile, Financial Sector Funds saw money flow out as investors questioned whether Trump can keep his tax and red-tape cutting promises, digested Australia’s tax raid on the sector and analyzed the latest commercial lending data from the U.S.
YTD Technology Sector Funds have supplanted Commodities Sector Funds as the best performers among the 11 major groups tracked by EPFR Global, with Infrastructure Sector Funds now second on that list and Energy Sector Funds still the worst collective performers. So far this year Real Estate Sector Funds have seen the biggest outflows and Commodities Sector Funds the biggest inflows.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.