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Riskier fixed income groups fare well in early February

Investors continued to move into fixed income fund groups during the first week of February, bringing their risk appetite with them. EPFR-tracked Emerging Markets Bond Funds recorded their biggest weekly inflow since early 3Q16 and High Yield Bond Funds since late 4Q16 as markets pencil in a significant pause – and even reversal – of monetary tightening in the US and Europe.

On the equity side, the rotation from Developed Markets Equity Funds to their emerging markets counterparts rolled on. Emerging Markets Equity Funds absorbed more fresh money that Developed Markets Equity Funds for the 12th time in the past 15 weeks as they extended a run of inflows that started in early October. US and Global Equity Funds added to their current redemption streaks as slowing global growth, fears that US President Donald Trump and the Democrat-controlled House of Representatives will put feuding over policymaking and Italy’s slide into recession kept investors on edge. But Europe Equity Funds snapped their 21-week run of outflows.

EPFR-tacked Bond Funds took in another $11.1 billion – a 56-week high – during the seven days ending February 6 while Equity Funds posted a collective inflow of $4.3 billion and Money Market Funds $35.2 billion. A week after they posted only their fifth inflow since the beginning of 2018, outflows from Dividend Equity Funds climbed to a two-month high despite the revised consensus on US and European interest rates.

At the single country and asset class fund levels, flows into UK Equity Funds climbed to a 49-week high, South Africa Equity Funds posted inflows for the seventh time in the past eight weeks and China Equity Funds recorded their biggest inflow since mid-December while redemptions from Spain Equity Funds climbed to levels last seen in early 4Q17. Total Return Bond Funds extended their longest run of inflows since 1Q16 and Bank Loan Funds their longest redemption streak since 1Q16.

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