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Europe Funds remain under pressure in late November as QE taper and Brexit vote loom

EPFR-tracked Europe Equity and Bond Funds posted their 12th and 16th consecutive outflows respectively during the fourth week of November as investors digested the fuel tax riots in France while looking ahead to a key British vote on the current ‘Brexit’ deal and the mid-December meeting of the European Central Bank. At that meeting the ECB is expected to vote for an end to its current asset buying program by Dec. 31, leaving European corporate and sovereign debt issuers without a back-stop that has been in place since 1Q15.

In addition to cutting their exposure to Europe, mutual fund investors continued to cut their exposure to fixed income asset classes and groups they see as a liquidity risk in times of market stress. Bank Loan Funds, which posted their biggest outflow since 4Q14 the previous week, saw another $1.2 billion flow out and Balanced, Total Return and High Yield Bond Funds all posted outflows for the week that exceeded $2.5 billion.

Overall, EPFR-tracked Equity Funds recorded a collective net outflow of $1.07 billion during the week ending November 28 while investors pulled $350 million out of Alternative Funds, $8.9 billion from Money Market Funds and $9 billion out of Bond Funds.

At the single country fund level UK Equity Funds posted outflows for the 32nd time in the past 38 weeks and Italy Equity Funds for the 19th time in the past 21 weeks, Italy and Switzerland Equity Funds experienced net redemptions for the sixth straight week and China Equity Funds chalked up their biggest outflow since early January. Korea Bond Funds recorded their biggest inflow since mid-April and Sweden Bond Funds since 2Q14.

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