Cameron Brandt

EPFR - fund flow & allocations data

US Equity Funds benefit as risk appetite slips in mid-September

With COVID-19 caseloads on the rise in Europe and key emerging markets, predictions for effective widescale vaccination slipping into 2Q21, last week’s technology sell off jolting market confidence and Sino-US tensions still running high, investor sentiment took a turn for the defensive during the second week of September. US Bond and Equity Funds absorbed a combined $33 billion, with the latter posting their biggest weekly inflow since 1Q19, while redemptions from Emerging Markets Equity, Europe Bond and Alternative Funds hit six, 12 and 25-week highs respectively.

EPFR - fund flow & allocations data

Swing to emerging markets continues in early September

Summer in the Northern Hemisphere is winding down, with the official transition to autumn taking place in less than two weeks. But flows to Emerging Markets Equity and Bond Funds, which endured a chilly spring and early summer, continued to heat up. A week after they posted their biggest inflow since 1Q19, EPFR-tracked Emerging Markets Bond Funds took in another $1.8 billion during the week ending Sept. 9 as they extended their current inflow streak to 10 weeks and $13.5 billion while Emerging Markets Equity Funds posted their fourth largest inflow year-to-date.

EPFR - fund flow & allocations data

Flows to Emerging Markets Bond Funds hit a YTD high

Yield hungry investors who flocked to US junk bonds in the immediate aftermath of March’s pandemic-driven sell off steered over $3 billion into EPFR-tracked Emerging Markets Bond Funds going into September. That was the biggest weekly inflow for this group since mid-1Q19 and extended their longest inflow streak since 2H17. Attractive yields underpinned by stronger growth compared to most developed markets have prompted investors to look beyond the more troubled markets such as Turkey. While willing to stretch for yield within the fixed income universe, those investors remain unconvinced by the rally in global equity markets – except at the sector level – with US Equity Funds posting their ninth outflow since mid-June in the teeth of fresh record highs for key indexes. Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates continue to get a pass: they chalked up their 33rd inflow in the 35 weeks year-to-date. Overall, Equity Funds surrendered a net $1.5 billion during the week ending Sept. 2 that lifted their total since the start of February past the $240 billion mark. Balanced Funds saw a net $1 billion flow out and Money Market Funds $43.7 billion while Alternative Funds absorbed $585 million and Bond Funds $22 billion.

EPFR - fund flow & allocations data

Major Money Market Fund groups navigating negative interest rates

EPFR-tracked Money Market Funds posted their third straight outflow, and 10th in the past 15 weeks, going into the final days of August as ultra-low and negative rates of return prod investors to look for alternatives. These cash management vehicles absorbed over $1 trillion in March and April amidst the global sell-off triggered by the COVID-19 pandemic. While Japanese and European Money Market Funds have been coping with negative interest rates at the short end of their yield curves for several years, managers of US MM Funds have generally been able to deliver a positive return for clients. But the compression of yields during the latest crisis has pushed real returns – investment gains minus fees – into negative territory. According to Paul Adams, Senior Editor at EPFR sister company iMoneyNet, “Right now 83.6% of the US fund providers who report to us are waiving or reducing fees to prevent clients experiencing de facto negative returns.”

EPFR - fund flow & allocations data

Quants Corner - Brexit redux: What to trade on?

Deadlines for Brexit, the UK’s departure from the European Union, have come, been missed and gone with dizzying frequency over the past four years. Another one is rapidly approaching. This one, the terms under which the UK and EU will trade with each other in the years to come, is important. Despite that importance there is – yet again -- no sign for a deal. The hard deadline for reaching an agreement is the final day of the year, and the EU says it wants to reach an agreement by October so that the European Parliament can pass the necessary legislation before the December 31 deadline. The odds of the deadline being met are shrinking. Both the UK and the EU are dealing with the Covid-19 pandemic, and the EU’s attention is focused on the economic problems of its members geopolitical issues such as the rising tensions between Greece and Turkey. So a trade deal, and the economic forecasts that will stem from it, could be in limbo for some time. How can EPFR data help in navigating waters where neither side can agree on where the channel markers should be placed? In this week’s post, we will take a more in-depth look at two options...

EPFR - fund flow & allocations data

For EM Funds, signs of a thaw in mid-August

The third week of August saw EPFR-tracked Emerging Markets Bond Funds post their seventh straight inflow and Emerging Markets Equity Funds snap a five week run of outflows as investors took another look at asset classes that have been hit particularly hard by the current pandemic. Between March 1 and July 31, a net $55 billion flowed out of Emerging Markets Bond Funds and $63 billion out of Emerging Markets Equity Funds.

EPFR - fund flow & allocations data

US Bond Funds remain the road most travelled

With the second quarter earnings season starting to wind down in the US and much of the investing world on vacation, fund flows during the second week of August stuck to the script they have followed for the past three months. US Bond Funds extended their current inflow streak to 19 weeks and over $280 billion, Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates posted inflows for the 30th time in the 32 weeks year-to-date and Japan Equity Funds took in fresh money for the 17th time in the past 20 weeks while Balanced Funds chalked up their ninth outflow in the past 10 weeks and Emerging Markets Equity Funds posted their 25th outflow in the past 26 weeks.

EPFR - fund flow & allocations data

Flows to SRI/ESG Equity Funds stumble in early August as investors remain on the defensive

Fund flows during the first week of August largely followed the pattern of late July as investors kept their heads down while they digested earnings reports and waited to see what kind of fiscal package will emerge from a divided US Congress. US Bond Funds posted their 18th consecutive inflow, flows to Money Market Funds were positive for the fourth time in the past five weeks and both Japan Equity and Gold Funds attracted solid amounts of fresh money while Emerging Markets Equity Funds posted their 24th outflow in the past 25 weeks and US Equity Funds their sixth in the past seven weeks. Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates posted a rare outflow. It is only their second since the beginning of last year and comes as the growing focus on the SRI/ESG theme has intensified the debate over the right definitions, criteria and standards for funds operating in this space. Year-to-date the SRI/ESG Equity and Bond Funds tracked by EPFR have attracted over $100 billion.

EPFR - fund flow & allocations data

As sobering data piles up, shape of predicted recovery changing for the worse

Going into August, investors hoping for a V-shaped recovery from the economic downturn triggered by the COVID-19 pandemic found themselves looking for new letters – W, U, L and K all have their advocates – as data from the US and Europe suggested the rebound that started in mid-2Q20 is losing momentum. Mutual investors responded by focusing on cash, precious metals and asset classes where there is a central bank acting as buyer of last resort. US Bond, Gold and Japanese Equity Funds all recorded healthy inflows during the week ending July 28th and Money Market Funds posted consecutive weekly inflows for the first time since early May.

EPFR - fund flow & allocations data

Equity Fund flows proving hard to stimulate

The third week of July saw European leaders agree on a $830 billion ‘rescue fund’ and the Nasdaq Index hit a new record high while US lawmakers negotiated the outlines of what would be a fifth fiscal package to combat the impact of the COVID-19 pandemic. But these developments drew a stronger reaction from fixed income investors, with EPFR-tracked Bond Funds posting their third largest weekly inflow year-to-date – and on record -- while Equity Funds collectively chalked up their fourth outflow in the past six weeks. Equity Fund groups dedicated to popular sectors continue to attract fresh money, as do those with socially responsible (SRI) or environmental, social and governance (ESG) mandates. But, as was the case during the second quarter, the list of top money magnets quarter-to-date is dominated by fixed income and cash management fund groups. However, two Equity Fund groups that were in the bottom 10 during 2Q20, Global and China Equity Funds, are currently in the top 10 QTD.

EPFR - fund flow & allocations data

Central Banks webinar - The visible hand: policy moves and their impact during the COVID-19 crisis

EPFR - fund flow & allocations data

Money Market Funds experience record redemptions in mid-July

With the average 30-day yield of taxable funds down to six basis points and pandemic-delayed tax deadlines looming, US Money Market Funds posted record outflows during the second week of July. The desire among investors to put money back to work, however, remains tempered by rising COVID-19 caseloads in the Americas, the lack of certainty about the economic damage done by the pandemic over the past four months and its likely course over the next six months.

EPFR - fund flow & allocations data

China Equity Funds start third quarter with huge inflows

The second biggest weekly inflow on record for China Equity Funds helped EPFR-tracked Emerging Markets Equity Funds snap their longest outflow streak since 2014 during the first week of July. Emerging Markets Bond Funds also enjoyed solid inflows and High Yield Bond Funds, which saw a 13-week, $71 billion inflow streak come to an end the previous week, absorbed over $3 billion.

EPFR - fund flow & allocations data

Funds with SRI/ESG mandates end second quarter on a high note

The final week of June was marked by uncertainty about the trajectory of America’s economic recovery and the future of its relations with China as new daily COVID-19 cases in the US topped 50,000 on the last day of the reporting period and China unveiled its new national security law for Hong Kong. Equity and Bond Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates, however, enjoyed a very good week with both groups setting new inflow records.

EPFR - fund flow & allocations data

Inflation Protected Bond Funds post new inflow record going into final week of 2Q20

Although the US headline inflation rate dipped to just 0.1% in May investors appear to be unconvinced this is the new normal for prices. During the week ending June 24 the Inflation Protected Bond Funds tracked by EPFR set a new weekly inflow record, breaking the $2 billion mark for the first time, as governments and central banks open the stimulus spigots ever wider to offset the economic impacts of the COVID-19 pandemic. Gold Funds also pulled in over $1 billion for the 11th time in the past 14 weeks. The flows into Inflation Protected Bond Funds contributed to another solid week for EPFR-tracked Bond Funds, which collectively extended their current inflow streak to 11 straight weeks. During than run, they have recouped some 40% of the $445 billion that investors pulled out of these funds in March.