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Rotation from Equity to Bond Funds rolls on

With 11 weeks of the first quarter gone, flows for EPFR-tracked Equity and Bond Funds continue to head briskly in opposite directions. Year-to-date, Bond Funds have – based on weekly data -- absorbed a net $118 billion while Equity Funds have seen over $60 billion flow out. The last time flows tilted so consistently in favor of Bond Funds was 2016, when the success of populist politicians in both Europe and the US and the UK’s vote to leave the European Union had investors of all stripes searching for relative safety.

Another recent rotation, from Developed to Emerging Markets Equity Funds, has lost steam as Emerging Markets Equity Funds posted outflows four of the past five weeks. But Developed Markets Equity Funds continue to drive the headline number for all Equity Funds, with Europe Equity Funds recording outflows 10 of the past 11 weeks and Japan Equity Funds mired in their longest redemption streak since 2Q16.

The latest week, ending March 20, saw EPFR-tracked Equity Funds surrender a net $20.6 billion. Investors committed $12 billion to Bond Funds, redeemed another $1.6 billion from Balanced Funds and pulled over $58 billion – a 39-week high – from Money Market Funds.

At the single country and asset class fund levels, Municipal and Mortgage Backed Bond Funds both posted their 11th consecutive weekly inflow and Total Return Bond Funds attracted over $1 billion for the third week running. Spain and France Equity Funds extended their current outflow streaks and redemptions from Korea Equity Funds hit levels last seen in late 1Q18 while Italy Equity Funds took in fresh money for the third straight week.

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