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FUND FLOWS: Why Investors Turned Their Backs On Sector Funds

U.S. fiscal policy, European monetary policy and an aging bull market pushed them to energy, utilities and commodities (primarily gold).

Only three of the 11 major Sector Fund groups tracked by EPFR posted inflows during the week ending Aug. 23. Differing degrees of uncertainty surrounding U.S. fiscal policy and Eurozone monetary policy, the winding down of the second quarter corporate earnings season and–in some cases–the desire to book some of the year’s gains all contributed to outflows ranging from $34 million for Financial Sector Funds to over $1.5 billion for Consumer Goods Sector Funds.

The three groups to attract fresh money were Utilities Sector Funds, Commodities Sector Funds, two-thirds of which went to Gold Funds, and Energy Sector Funds which posted inflows for the first time since late June as data on U.S. energy stockpiles continued to show declines.

The outflow recorded by Consumer Goods Sector Funds was the seventh in the past nine weeks and the biggest since the third quarter of 2014. ETFs with retail, consumer discretionary and U.S. home construction mandates accounted for six of the seven funds experiencing the heaviest redemptions. The consumer goods sector was a laggard during the second quarter U.S. corporate earnings season.

So far this year Financial Sector Funds remain at the top of the list when it comes to attracting fresh money, with Technology Sector Funds in second spot but still the leaders when it comes to collective performance. Real Estate Sector Funds have supplanted Telecoms Sector Funds as the group experiencing the heaviest redemptions. Energy Sector Funds are still the worst performers.

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

TAGS: Mutual Funds
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