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Money Market Funds pull in over $100 billion in early August

Mutual fund investors opted for liquidity during the first week of August as they digested an unpleasant cocktail of weak German data, fears of a currency war between the US and China, hardening positions on Brexit and disappointment with the Fed’s 25 basis points cut in US interest rates at the end of July. Flows into Money Market Funds jumped to a 32-week high, exceeding the $100 billion mark for only the second time since EPFR started tracking them, while a net $24.9 billion flowed out of Equity Funds - their biggest weekly total year-to-date – and another $2.7 billion out of Balanced and Alternative Funds combined.

Risk appetite, already in short supply, all but evaporated during the week ending August 7. Redemptions from Emerging Markets Bond, High Yield Bond, Alternatives, and Emerging Markets Equity Funds hit 11, 12, 32 and 206-week highs respectively while Gold Funds posted their biggest weekly inflow since mid-1Q17 and Municipal Bond Funds on record.

The latest flows breathed fresh life into a rotation from Equity to Bond Funds that started early in the year and, by early July, appeared to have run its course. Investors fueling this rotation continue to pay a significant premium for the perceived safety of cash and fixed income. Collective performance so far this year for all EPFR-tracked Bond Funds is +5.7% and for Money Market Funds +0.24% while Equity Funds are still up nearly 14%.

 

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