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German data and US politics chill appetite for equity exposure

With the specter of impeachment proceedings again stalking US President Donald Trump’s presidency, continuing stress in the short-term dollar lending market and German’s economic woes fueling speculation that the Eurozone could slip in to recession, risk appetite was replaced with risk aversion in late September. Equity Funds bore the brunt. Redemptions from US and Asia ex-Japan Equity Funds hit levels last seen in 4Q18 and 4Q16 respectively, money flowed out of Japan Equity Funds for the fourth week in a row and Europe Equity Funds posted their 36th outflow in the 38-weeks year-to-date. Balanced Funds, which can invest in both equity and fixed income assets, recorded their biggest outflow since mid-May a week after snapping a redemption streak stretching back to 2Q18.

Fixed income investors also took a turn for the cautious, with Local Currency Emerging Markets Bond Funds posting outflows, fresh commitments to High Yield Bond Funds falling to a 19th of the previous week’s total and redemptions from Bank Loan Funds climbing to a five-week high. Bond Funds with investment grade mandates, meanwhile, attracted over $8 billion.

Overall, the week ending September 25 saw EPFR-tracked Equity Funds post a collective net outflow of $22 billion. Investors also pulled $2 billion out of Balanced Funds while steering $975 million into Alternative Funds, $9.2 billion into Bond Funds and $35 billion into Money Market Funds.

 

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