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Bond Funds in the Money as Equity Indexes Soar

Mutual Fund investors continue to view the recent rally by global equity markets with varying degrees of suspicion. Going into the final week of February they redeemed another $12.7 billion from EPFR-tracked Equity Funds, taking total redemptions since the beginning of 4Q18 over the $125 billion mark, while extending the current inflow streak for all Bond Funds to seven weeks and $40 billion.

Of the $125 billion that has flowed out of Equity Funds since the beginning of October, over $50 billion has come from Europe Equity Funds which remain under pressure from a combination of economic, political and geopolitical headwinds ranging from Brexit to the impact of global trade tensions. But the week ending February 20 did see Europe Bond Funds benefit from the current, broad rotation as they posted their biggest inflow since late July.

Overall, EPFR-tacked Bond Funds absorbed a net $4.5 billion during the third week of February while investors pulled $1.4 billion out of Balanced Funds and $19 billion out of Money Market Funds. Although Equity Funds collectively posted outflows for the 12th time in the past 15 weeks, those with socially responsible (SRI) or environmental, social and governance (ESG) mandates chalked up their seventh straight inflow and 17th in the 21 weeks since the beginning of October.

At the single country and asset class fund levels, Mortgaged Backed Bond Funds followed up last week’s record inflow by pulling in another $803 million and Bank Loan Funds recorded their 14th consecutive weekly outflow. Redemptions from Turkey Equity Funds were the biggest since early 3Q18 while flows into Spain, Denmark and France Bond Funds hit 10, 58 and 68-week highs respectively.

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