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Investors flee US muni and Eurozone bond funds but favour US equity

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Investors pulled a record amount of money from US Municipal Bond Funds in the week ending January 19, and the ongoing sovereign debt crisis in Europe put EPFR Global-tracked bonds funds on the back foot during the third week of January as investors maintained their recent focus on Developed Markets Equity Funds.

 

Overall redemptions from all bond funds during the week ending January 19 totalled USD1.7 billion as robust flows into High Yield Bond Funds partially mitigated outflows from US, Europe and Global Bond Funds. Flows into all equity funds hit a five week high of USD10.1 billion, of which USD6.9 billion flowed into US Equity Funds. It was the sixth week of net inflows to US Equity Funds in the past seven weeks, amounting to total inflows of USD17.3 billion for this period, mainly into Large Cap funds. This comes on the heels of total outflows from all US Equity Funds of USD49 billion in 2010. Emerging Markets Equity Funds accounted for USD1.7 billion of the weekly inflows, and institutional investors swamped modest inflows from their retail counterparts as they pulled over USD30 billion out of Money Market Funds.

Concerns about the Eurozone’s ability to prevent the debt woes of Greece and Ireland spilling over into Spain and even Italy also left their mark on equity fund flows, with Emerging Europe Equity Funds having their worst week since early mid-2Q10 and flows into Europe Equity Funds heavily biased towards the region‚s strongest economy, Germany.

Dollar weakness also resurfaced as an issue for investors going into the fourth week of January. But the resumption of the dollar’s slide came too late in the week to really impact recent flow patterns, although daily data showed ebbing flows into several emerging markets fund groups and a rebound in flows into Commodity Sector and Russia Equity Funds, with the latter setting a new weekly record.

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