High Yield Bond Funds snapped their short, sharp losing run and Japan Equity Funds had their best week since mid-February as 20 of the 25 major fund groups tracked by EPFR Global posted generally modest inflows.
Inflation resurfaced as a driver of fund flows, with commitments to Inflation Protected Bond Funds hitting a 62 week high as the European Central Bank and the People Overall EPFR Global-tracked Equity Funds recorded collective net inflows of USD6.19 billion, a 10 week high, during the week ending July 6. Emerging Markets Equity Funds accounted for USD1.36 billion of that total. Bond Funds took in USD3.19 billion and Money Market Funds surrendered USD2.26 billion.
EPFR Global-tracked Emerging Markets Equity Funds posted back-to-back weekly inflows for the first time since early May as retail investors committed fresh money for the first time in five weeks. There was a marked preference for diversified exposure, with Global Emerging Markets (GEM) Equity Funds recording the biggest inflows among the four major fund groups and regional funds accounting for the lionAsia ex-Japan Equity Funds.
Flows into Asia ex-Japan Equity Funds were again coloured by significant activity among Taiwan ETFs as institutional investors continue to adjust their allocations in the wake of MSCI China Equity Funds did enjoy their best week in three months despite fresh tightening measures and the recent focus on local government debts.
EMEA Equity Funds extended their losing run as most sub-groups experienced tepid flows in either direction. The release of funds to Greece did alleviate the pressure on Emerging Europe Equity Funds, which posted their smallest outflow since their current nine week redemption streak began in early May, and Russia Equity Funds recorded modest inflows as retail investors committed money for the first time in four weeks.
Some better employment numbers from the US and manufacturing data from Japan, allied to relief that GreeceDeveloped Markets Equity Fund groups attract fresh money during the first week of January. US Equity Funds led the way in dollar terms, Japan Equity Funds had the best week in terms of flows as a percentage of assets under management and Global Equity Funds snapped the longest outflow streak.
Japan Equity Funds, which had their best week since they took in USD746 million during the second week of February, benefited from fresh evidence that companies are regaining traction after the disruption caused by the March 11 earthquake and tsunami. Public reconstruction efforts, however, remain bogged down as key bills have become pawns in the current government
On the other side of the Pacific key bills remain conspicuous in their absence as Republicans and Democrats spar over deficit reduction measures and the debt ceiling. But, in the first week post-QE2, retail investors committed money to US Equity Funds for the first time since the third week of April. The bulk of the weekLarge Cap Growth and Blend Funds accounting for over half of all the fresh money absorbed by US Equity Funds.
Europe Equity Funds again eked out modest inflows as institutional commitments to Germany Equity Funds offset a fourth consecutive week of retail redemptions. Recognition of the value in European equities is being tempered by the ongoing Eurozone debt crisis, the ECB
Global Equity Funds, which on average allocate over 40% of the portfolios to developed European markets, snapped their longest outflow streak since 3Q10 while Pacific Equity Funds, while the other major diversified developed markets fund group, recorded back-to-back weeks of inflows for the first time since May.
Collective flows into Global Sector Funds climbed to a 10 week high during the week ending July 6, with both defensive and growth-oriented sectors attracting fresh money. Of the nine major groups only Telecoms Sector Funds experienced redemptions while the other eight posted inflows ranging from USD4 million to USD312 million.
Among the growth-oriented sector fund groups Energy Sector Funds attracted the biggest inflow as oil prices moved higher. But Technology Sector Funds, which posted by far the best performance numbers of any sector fund group, attracted less the USD10 million for the week. "Retail investors seem particularly wary of the Technology sector," observed EPFR Global Research Director Cameron Brandt. "Samsung
Among the more defensively perceived sector fund groups Consumer Goods and Healthcare/Biotechnology Sector Funds stood out. Year-to-date flows into the latter fund group pushed north of USD4 billion, propelled in part by M&A activity in the sector and by the perception that valuations in several sub-sectors are relatively cheap.
With fears of a Greek default ebbing enough for inflation to move back out of the wings, investors resumed their search for ways to counteract the toxic combination of rising prices and rock-bottom interest rates in many of the safer markets. High Yield Bond Funds saw their four week, USD8.3 billion outflow streak come to an end as both retail and institutional investors returned while Emerging Markets Local Currency Bond Funds posted inflows for the 15th consecutive week and flows into Inflation Protected Bond Funds hit levels last seen in early 2Q10.
US and Global Bond Funds also posted solid inflows, with the latter taking in fresh money for the 15th week running as YTD inflows climbed past the USD36 billion mark. Flows into US Bond Funds favoured funds with mandates for short and intermediate term debt.
The slightly improved outlook for Greece was not enough to draw investors back to Europe Bond Funds, which recorded outflows for the 23rd time in the 27 weeks YTD as Portugal was hit by another ratings downgrade and the spread for credit default swaps on Spanish and Italian debt inched higher.
European fixed income investors, meanwhile, are focusing on emerging markets debt, with Europe-domiciled Emerging Markets Bond Funds attracting fresh money for 15 straight weeks while US Bond Funds based in the region have experienced four consecutive weeks of redemptions.
