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FUND FLOWS: Redemptions from Junk Bond Funds Hit 26-Month High on Interest Rake Hike

The second week of March also saw redemptions from emerging markets equity hit a year-to-date high.

A week which ended with an expected increase in U.S. interest rates, and an unexpectedly subdued performance by the major nationalist party in the Netherlands’ general election, saw EPFR Global-tracked High Yield Bond Funds experience their biggest outflows since late-4Q14 and Dividend Equity Funds their biggest inflows since late 1Q15. The second week of March also saw redemptions from Emerging Markets Equity and Balanced Funds hit year-to-date and eight-month highs respectively.

The solid macroeconomic data that underpinned the Federal Reserve’s Open Markets Committee’s decision to increase the benchmark U.S. interest rate by a further 25 basis points encouraged equity investors to commit another $12 billion to U.S. Equity Funds. But the better than expected outcome of the Dutch election, from a European Union perspective, came too late to stop Europe Bond and Equity Funds from recording fresh outflows.

Overall, investors committed more than $14 billion to EPFR Global-tracked Equity Funds during the week ending March 15. Meanwhile, Bond Funds recorded their first collective outflow — totaling $740 million — since the third week of December and nearly $11 billion flowed out of Money Market Funds.

At the country level, investors pulled over $100 million from France Equity Funds for the fourth week running, redeemed over $300 million from both Russia and Korea Equity Funds and left Emerging Europe Equity Funds looking at their biggest weekly outflow since early 2Q15.

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

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