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Flows to Emerging Markets Bond Funds hit a YTD high

Yield hungry investors who flocked to US junk bonds in the immediate aftermath of March’s pandemic-driven sell off steered over $3 billion into EPFR-tracked Emerging Markets Bond Funds going into September. That was the biggest weekly inflow for this group since mid-1Q19 and extended their longest inflow streak since 2H17. Attractive yields underpinned by stronger growth compared to most developed markets have prompted investors to look beyond the more troubled markets such as Turkey.

While willing to stretch for yield within the fixed income universe, those investors remain unconvinced by the rally in global equity markets – except at the sector level – with US Equity Funds posting their ninth outflow since mid-June in the teeth of fresh record highs for key indexes. Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates continue to get a pass: they chalked up their 33rd inflow in the 35 weeks year-to-date.

Overall, Equity Funds surrendered a net $1.5 billion during the week ending Sept. 2 that lifted their total since the start of February past the $240 billion mark. Balanced Funds saw a net $1 billion flow out and Money Market Funds $43.7 billion while Alternative Funds absorbed $585 million and Bond Funds $22 billion.

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