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FUND FLOWS: Thirst for Yield Pulled Bond Money One Direction

The start of December wasn’t short of geopolitical grist, either.

With U.S. bombers flying over the Korean peninsula, world leaders scrambling for a response to U.S. President Donald Trump's declaration that Jerusalem is the capital of Israel, and border questions throwing fresh spanners in the workings of the U.K.'s “Brexit” strategy, there was plenty of geopolitical grist for investors to chew on during the first week of December.

But, although some EPFR-tracked fund groups saw flows affected by these issues, there was a stronger response to the interest rate hike that markets expect after the U.S. Federal Reserve's meeting next week and the changes to the U.S. tax code making their way through Congress.

Among the week's winners—in flow terms—were Financial Sector Funds (global growth, higher U.S. interest rates), Brazil Equity Funds (ongoing reform story), Emerging Markets Bond Funds (yield hunger) and Korean Equity Funds (buying on dips). Meanwhile, U.S. Municipal Bond Funds recorded their biggest outflow since the end of 2016, investors pulled money from Real Estate Sector Funds for the 13th straight week and redemptions from Dividend Equity Funds hit their highest levels since March.

Overall, EPFR-tracked Equity Funds absorbed a net $3 billion during the week ending Dec. 6 while Bond Funds took in $1.2 billion and Money Market Funds over $16 billion.

At the asset class and single country fund levels, Mortgage Backed Bond Funds saw their longest inflow streak since the third quarter of 2016 come to an end and High Yield Bond Funds posted their sixth straight outflow. Among Europe Country Fund groups, redemptions from U.K. and Ireland Equity Funds climbed to 12 and 28-week highs and over $800 million flowed out of Switzerland Equity Funds.

Fund flow data provided by EPFR Global, an Informa Financial Intelligence company.


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