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Emerging Markets Funds forge ahead in mid-January

Going into the second half of January EPFR-tracked Emerging Markets Equity Funds posted their 14th consecutive inflow and commitments to Emerging Markets Bond Funds hit a 51-week high as investors reassessed these asset classes. With the US government shut down by partisan gridlock, the UK’s exit deal with the European Union decisively rejected by British legislators and monetary policy still being tightened in the US and Eurozone, the faster growth and cheaper valuations offered by emerging markets are – in many cases – beginning to outweigh the risks associated with them.

The latest twists in the UK’s ‘Brexit’ saga kept the pressure on Europe Equity and Bond Funds. The former recorded their 18th straight outflow, and 44th in the past 45 weeks, while Europe Bond Funds saw their three-week inflow streak come to an end. But High Yield Bond Funds benefited from the recent, modest increase in risk appetite, chalking up their biggest inflow since early 2Q17.

Overall, the week ending January 16 saw EPFR-tracked Bond Funds taking in a net $2.8 billion and Alternative Funds $586 million. Investors pulled $1.49 billion out of Balanced Funds, $4.8 billion from Equity Funds and $28.1 billion from Money Market Funds.

At the asset class and single country fund levels, flows into Norway Equity Funds and redemptions from Norway Bond Funds were the largest since 1Q17 and 4Q16 respectively. China Equity Funds posted consecutive weekly outflows for only the third time since the beginning of 2018 and redemptions from UK Equity Funds jumped to a 10-week high. Bank Loan Bond Funds extended their longest run of outflows since 1Q16, Inflation Protected Bond Funds posted an inflow for the first time in over four months and flows into Total Return Bond Funds hit a 37-week high.

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