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A post-election bounce for Healthcare Funds

The broad flow patterns stayed the same for most EPFR-tracked fund groups going into the November US presidential election. But the pace of flows slowed until investors got a fix on the likely outcome – a ‘blue ripple’ putting Democrat Joe Biden in the White House but failing to wrest the Senate from Republicans – and deployed their money accordingly.

Daily flows into Healthcare Sector Funds hit their highest level since April 8 the day after the election, commitments to US Bond Funds climbed appreciably and all Equity Funds recorded their biggest collective inflow since mid-October. But broader flow trends continued to play out, with the week ending Nov. 4 seeing both Emerging Markets Equity and Bond Funds post inflows, funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates attracting fresh money, equity investors showing a preference for diversified and Asian exposure, fixed income investors continuing to worry about inflation and US Money Market Funds posting their 12th outflow in the past three months.

The redemptions from US Money Market Funds are fueling a debate about the degree to which search for yield, declining returns for money deposited and measures introduced after the 2008-09 financial crisis to limit systematic risk, including triggers for gates and fees, are driving these outflows.

According to Paul Adams, the senior editor at EPFR sister company iMoneyNet, “Assets in short-duration funds tracked by iMoneyNet also remain high, suggesting that investors are searching for yield and may be transitioning some assets to that segment of the cash management industry, But they’re doing that cautiously, and without taking on too much maturity or credit exposure. Frankly, there isn’t much yield to be found and with lots of uncertainties ahead – the pandemic, low rates, the uptick in bankruptcies, divided government and so on -- cash managers will likely remain cautious through the end of the year and into 2021, thereby keeping MMF balances high”.

 

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