Institutional equity investors focused on developed markets continued to shrug off the prospect of higher U.S. interest rates and the possibility of another debt ceiling standoff during the week ending March 15, with flows into EPFR Global-tracked Developed Markets Equity Funds hitting a four-week high as they extended their longest inflow streak since 4Q15. Retail redemptions, however, were the largest in over 14 months.
U.S. Equity Funds accounted for the bulk of the week’s headline number, taking in $12 billion for the week as funds with a growth mandate handily outperformed their value counterpart across all capitalizations. Among actively managed U.S. Equity Fund sub-groups Small- and Mid-Cap Value Funds posted inflows, as did Large-Cap Growth Funds. The interest U.S. equities have attracted since last November's election is also reflected in the latest numbers for the separately managed accounts tracked by PSN Enterprises, part of EPFR Global sister company Informa Investment Solutions (IIS), which show that U.S. stocks accounted for the biggest share of last year’s growth in equity assets.
Although investors got the result they were hoping for from the Netherlands, where Geert Wilder’s Freedom Party and its nationalist Euroskeptic agenda fell well short of claiming the biggest share of legislative seats, Europe Equity Funds ended the week by posting modest outflows. Investors are more worried about the political dynamics of France and Italy where the dynamics could take a turn for the worse if the Turkish government responds to the Dutch decision not to allow Turkish officials to campaign in support of April’s constitutional referendum by weakening (or even ending) the current agreement with the EU to stem illegal immigration.
Foreign currency denominated flows to Japan Equity Funds faltered during the second week of March, but were more than offset by yen-denominated flows. Japanese companies are enjoying strong profit growth but remain reluctant to boost wages, preferring instead to channel their investment spending towards new plants and equipment.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.