The week ending 15 January saw over USD21bn flow out of money market funds as equity investors showed more energy, bidding up key developed market indexes to multi-year or record highs.
This helped EPFR Global-tracked equity funds record their biggest inflow since the fourth week of November.
Fund groups that carried some momentum into the New Year again fared well, with Europe equity funds absorbing over USD4bn, Japan equity funds taking in another USD1.3bn and flows into China equity funds hitting a 51 week high.
During a week when collective flows into all equity funds totalled USD9.4bn retail investors made their strongest showing since early August. But they continued to shun emerging markets equity funds, a group that last saw retail money in early 2Q13, and they were net redeemers from bond funds for the eighth time in the past 10 weeks.
The week’s flows do suggest that political risk is, for the moment, trading at a steep discount. While the streets of Bangkok were choked with protestors trying to unseat the government Thailand equity and bond funds both posted their third consecutive week of inflows. And investors have responded to Turkey’s political crisis by committing fresh money to Turkey equity funds each of the past four weeks.
All four of the major EPFR Global-tracked developed markets equity funds posted inflows during the second week of the New Year as some US and European indexes tested their record highs. Flows into global equity funds hit a seven week high, Japan equity funds continued their strong start to the year and Europe equity funds recorded their fourth biggest weekly total on record. Three-quarters of the money absorbed by Europe equity funds this week went into diversified regional funds with country fund groups dedicated to the UK, Spain and Switzerland accounting for much of the remainder. Retail investors made their strongest showing since early 4Q06, committing over USD1bn against a backdrop of mixed macroeconomic data, growing concern about deflation and speculation surrounding this year’s ‘stress-testing’ of Eurozone banks.
Once again commodities sector funds headed the list of groups seeing outflows, with gold funds accounting for the bulk of the week’s redemptions. Silver funds recorded their sixth consecutive week of outflows, the longest such run since the current financial crisis began, but agricultural commodities funds ended a 13 week redemption streak with their biggest inflow since early August. In terms of YTD performance, however, commodities sector funds are second only to healthcare/biotechnology sector funds, which topped the list in 2013 with a 45 per cent gain. Telecoms sector funds, the third best performer in 2013 but the second worst when it came to attracting investors’ money, have started the New Year with two consecutive weekly inflows.
EPFR Global-tracked bond funds posted back-to-back weeks of inflows for only the second time since 2Q13 as commitments to US, Europe and global bond funds more than offset further redemptions from emerging markets and Asia Pacific bond funds. Overall flows were only a fifth of the previous week’s USD5.2bn as retail investors pulled money out of these funds for the 30th time in the past 33 weeks. At the asset class level flows into high yield bond funds climbed to a six week high as Europe high yield bond funds took in fresh money for the 28th straight week and funds with global mandates recorded their biggest net inflows since late July.