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What are the alternatives to an overheating US?

The sheer levels of fiscal and monetary support the US economy is currently enjoying make it hard for investors to look past the world’s largest economy. But, with the tension between surging demand and constrained supply reflected in the latest headline inflation number, investors took a look at the alternatives to US asset classes during the second week of May.

A reporting period that ended with investors digesting the number for US inflation in April – up 4.2% year-on-year, a 13-year high – saw flows into EPFR-tracked Inflation Protected Bond Funds hit a 23-week high. China Equity Funds, meanwhile, posted consecutive weekly inflows for the first time since early March, Europe Bond and Equity Funds extended their longest inflows streaks since 3Q19 and 1Q18 respectively, flows to Gold Funds hit an 18-week high and Alternative Funds posted collective inflows for the sixth straight week and 16th time in the past 20 weeks.

 

 

 

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  • EPFR - fund flow & allocations data

    Investors still searching for that elusive fix

    Global Navigator

    What narrative to back? The developed markets reflation story? An increasingly green future? A fairytale financial universe populated by cryptocurrencies and meme stocks? A gothic novel featuring higher taxes, inflation and state intervention? The search for direction during the first week of June saw investors commit over $5 billion to the two major EPFR-tracked multi asset fund groups, increase their exposure to Europe’s gathering rebound, add to their inflation hedges and extend lengthy inflow streaks for a number of fund groups with socially responsible (SRI) or environmental, social and governance (ESG) mandates. US Equity Funds, however, saw their record-setting run of inflows come to an end as the focus shifted from America’s strong growth to May’s headline inflation number – it came in at 5%, the highest since 2008 – and the higher taxes that currently seem inevitable. Municipal Bond Funds saw flows hit a 17-week high as they recorded their 22nd inflow year-to-date, TIPS Bond Funds racked up their 36th consecutive inflow and US Bank Loan Funds absorbed fresh money for the 23rd straight week. Overall, EPFR-tracked Bond Funds recorded a collective inflow of $12.4 billion during the week ending June 9. Equity Funds took in a net $1.5 billion, a number that would have negative but for flows into SRI/ESG Funds, with Dividend Equity Funds posting their 13th inflow in the past 15 weeks. But YTD net flows into all Equity Funds have already exceeded the current full-year record of $358 billion set in 2013. Three out of every four dollars committed by equity investors so far this year have gone to Equity ETFs.

    Topic Industry News

  • EPFR - fund flow & allocations data

    Oiling the wheels of inflation?

    Global Navigator

    The final days of May and first two of June did little to help investors reconcile the tension between the US reflation story and signs that inflationary pressures are building in the world’s largest economy. With US President Joe Biden’s first budget proposal calling for an 18% jump from the current fiscal year’s budget to $6 trillion in FY22, with well over $1 trillion of that borrowed, and the price of oil hitting a one-year high the case for both outcomes received a boost during the week ending June 2. Investors responded by adding to their exposure to US assets and boosting their inflation hedges. Flows into Commodities Sector Funds hit a 14-week high, the current inflow streak for Inflation Protected Bond Funds hit 28 weeks and $50 billion, US Equity Funds absorbed fresh money for the 10th straight week – their longest such run since EPFR started tracking them in 4Q00 – and US Bond Funds recorded their 60th inflow since the beginning of 2Q20. Europe’s accelerating recovery currently offers a developed market rebound story with much lower inflation expectations. Europe Equity Funds extended their longest inflow streak since 4Q17 and Europe Bond Funds chalked up their 11th inflow in the past 12 weeks. Overall, the week ending June 2 saw EPFR-tracked Equity Funds record a collective inflow of $14.7 billion. Alternative Funds pulled in $738 million, Balanced Funds $1.8 billion, Bond Funds $11.7 billion and Money Market Funds $16.2 billion.

    Topic Industry News

  • EPFR - fund flow & allocations data

    Pace of Green - One fund steals march in Mexican ESG

    Pace of Green

    It’s amazing how much money one fund can gather when it hits a sweet spot. Last month, money poured into the Mexican ESG category, continuing a strong run that started in August last year, according to EPFR data. But all these flows were driven by just one exchange-traded fund (ETF) - iShares ESG MSCI Mexico...

    Topic Industry News ESG

  • EPFR - fund flow & allocations data

    Assets continue to build up in US Money Market Funds

    Global Navigator

    While pent-up consumer demand and catch-up business investment have been key assumptions behind the US reflation story, one reservoir of fuel for this narrative continues to fill up. During the week ending May 26, flows into EPFR-tracked US Money Market Funds hit a 51-week high, lifting year-to-date inflows to these liquidity vehicles over the $300 billion mark. Investors remain torn between the eye-popping rebound in US economic growth, bolstered by epic levels of fiscal stimulus and expectations that the combination of current vaccinations and past infections will add up to ‘herd immunity’ against Covid-19 by 3Q21, and fears this rebound will lift inflation – and inflationary expectations – to disruptive heights. US Equity Funds recorded their 15th inflow in the past 16 weeks while Bank Loan and Inflation Protected Bond Funds absorbed fresh money for the 21st and 27th consecutive week respectively and flows into Gold Funds hit a 35-week high.

    Topic Industry News

  • EPFR - fund flow & allocations data

    Tale of two pandemics could leave a dangerously uneven playing field

    Tale of two pandemics could leave a dangerously uneven playing field

    Experts have warned that failing to share Covid vaccines with poorer nations will ultimately harm all countries as it allows dangerous variants to generate and spread. From an economic perspective, it also kills off trade with vital partners. These warnings are coming to pass...

    Topic Industry News

  • EPFR - fund flow & allocations data

    Investors want to go away from inflation in May

    Global Navigator

    With the financial headlines dominated by the latest US inflation data, volatile cryptocurrency markets and ‘taper tantrum’ retrospectives, investors spent the third week of May revisiting their earlier assumptions about the best allocations strategy to see them through the summer months and beyond. The fear that US headline inflation at a 13-year high in April is a warning that the US Federal Reserve’s “transitory” narrative should be treated with caution chased over $1 billion out of Technology Sector Funds and over $2 billion from High Yield Bond Funds. Meanwhile, flows into Silver, Gold and Inflation Protected Bond Funds hit 15, 19 and 24-week highs respectively while Bank Loan Funds added to their longest inflow streak since 1H17. Investors continued to position themselves for reflation in Europe and a greener future, although Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates recorded their smallest weekly inflow since early November. Overall, the week ending May 19 saw investors steer a net $91 million into Alternative Funds, $2.4 billion into Balanced Funds, $3.6 billion into Money Market Funds, $6.8 billion into Bond Funds and $12.6 billion into Equity Funds.

    Topic Industry News

  • EPFR - fund flow & allocations data

    Quants Corner - To rotate or not rotate, that is the question

    Quants Corner

    As vaccination numbers around the world creep up, US consumers find themselves awash in cheap credit – and, in some cases, ‘helicopter money’ – and growth forecasts for some emerging markets are still in the 8-12% range, the case for cyclical stocks and sectors grows more compelling by the day. On the other hand, the case for staying on the defensive can still be made. The spread of new COVID-19 variants has cast a shadow over the expected pace of the world’s recovery. Moreover, despite the closures in retail, services, and travel, and move to remote working over a year ago, the anticipated outperformance by defensive sectors such as Health Care and Consumer Staples never materialized. Cyclicals pushed above and beyond from mid-May 2020 onwards. Read more...

    Topic Industry News

  • EPFR - fund flow & allocations data

    Quants Corner - To rotate or not rotate, that is the question

    Quants Corner

    As vaccination numbers around the world creep up, US consumers find themselves awash in cheap credit – and, in some cases, ‘helicopter money’ – and growth forecasts for some emerging markets are still in the 8-12% range, the case for cyclical stocks and sectors grows more compelling by the day. On the other hand, the case for staying on the defensive can still be made. The spread of new COVID-19 variants has cast a shadow over the expected pace of the world’s recovery. Moreover, despite the closures in retail, services, and travel, and move to remote working over a year ago, the anticipated outperformance by defensive sectors such as Health Care and Consumer Staples never materialized. Cyclicals pushed above and beyond from mid-May 2020 onwards. Read more...

    Topic Industry News

  • EPFR - fund flow & allocations data

    What are the alternatives to an overheating US?

    Global Navigator

    The sheer levels of fiscal and monetary support the US economy is currently enjoying make it hard for investors to look past the world’s largest economy. But, with the tension between surging demand and constrained supply reflected in the latest headline inflation number, investors took a look at the alternatives to US asset classes during the second week of May. A reporting period that ended with investors digesting the number for US inflation in April – up 4.2% year-on-year, a 13-year high – saw flows into EPFR-tracked Inflation Protected Bond Funds hit a 23-week high. China Equity Funds, meanwhile, posted consecutive weekly inflows for the first time since early March, Europe Bond and Equity Funds extended their longest inflows streaks since 3Q19 and 1Q18 respectively, flows to Gold Funds hit an 18-week high and Alternative Funds posted collective inflows for the sixth straight week and 16th time in the past 20 weeks.

    Topic Industry News

  • EPFR - fund flow & allocations data

    Riding the US consumption rocket

    Global Navigator

    Coming into 2021 investors were looking to Asia to lead the global rebound. Between December 2020 and the end of January 2021, investors pulled $55 billion from EPFR-tracked European and North American Equity Fund groups while steering over $18 billion into Asia Pacific and Asia ex-Japan Equity Funds. Since the beginning of the second quarter, however, over $36 billion has flowed into North American and Europe Equity Funds compared to just $2 billion for all Asian groups. A key driver of this shift is the American consumer. With an improving employment picture garnished by a series of federal stimulus checks, retail sales in the US during April were up over 20% year-on-year. Investor cash is following the trend. US Equity Funds posted their 12th inflow in the past 13 weeks and flows into Consumer Goods Sector Funds hit a seven week high as that group extended its longest inflow streak since EPFR started tracking them in 4Q00. Furthermore, retail redemptions from US Money Market Funds are gathering momentum, suggesting more fuel on the consumption fires as summer approaches.

    Topic Industry News

  • EPFR - fund flow & allocations data

    Educational losses scar outlook for recovery in many countries

    Educational losses scar outlook for recovery in many countries

    With the success of some vaccine rollouts, the worst of the COVID-19 pandemic appears to be over, at least in the developed world. But, behind the triumphant headlines, the world is still faced with a lot of economic ground to make up. There is much to try and make whole. But young people will suffer some of the worst consequences if the policies aimed at healing the scars of the recent recessions do not tackle the educational costs they have been saddled with over the past 14 months...

    Topic Industry News

  • EPFR - fund flow & allocations data

    EPFR – Rebound vs. Recovery; looking beyond reflation

    EPFR

    Looking beyond reflation… Coming into 2021 investors were seeking exposure to the green-tinged global reflation story they expect in the second half of this year and hedging against the inflation they fear will accompany renewed growth. This tension between reflationary and inflationary expectations also kept volatility in the spotlight. These themes have persisted during the first quarter. Equity funds with global mandates have posted inflows every week year-to-date, as have equity and bond funds with funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates. At the same time Inflation Protected Bond Funds have absorbed fresh money for 20 straight weeks and Bank Loan Funds, traditionally used to play rising short-term interest rates, for 14 consecutive weeks...

    Topic Global Investment Flows ESG

  • EPFR - fund flow & allocations data

    Waiting to read the writing on the wall

    Global Navigator

    Markets moved sideways – albeit at elevated levels -- and money piled up in US liquidity funds for much of the week ending April 28 as investors waited on a slew of key earnings reports, the conclusion of the US Federal Reserve’s latest policy meeting and US President Joe Biden’s address to both Houses of Congress. Some compelling earnings reports from technology bellwethers drove US indexes to new record highs as the latest reporting period wound down. While largely marking time, investors did stick to their recent game plan of buying exposure to global and US growth, taking out insurance against higher inflation, greening their portfolios and keeping cash on hand. US Equity Funds posted their 11th inflow in the past 12 weeks, Global Equity Funds extended their longest inflow streak since 2017, combined year-to-date flows into Equity and Bond Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates moved north of the $150 billion mark and Inflation Protected Bond Funds chalked up their 23rd consecutive inflow. Overall, EPFR-tracked Equity Funds absorbed a net $10.5 billion during the fourth week of April – with Dividend Equity Funds extending their longest run of inflows since 4Q19 -- while Balanced Funds took in $685 million, Alternative Funds $1.3 billion and Bond Funds $13.7 billion. Money Market Funds, despite the biggest weekly outflow from Japan Money Market Funds since late 4Q18, pulled in $57.3 billion as they chalked up their eighth collective inflow in the last 10 weeks

    Topic Industry News ESG

  • EPFR - fund flow & allocations data

    Quants Corner - Getting ready for the ‘transitory’ guest

    Quants Corner - Getting ready for the ‘transitory’ guest

    The US Federal Reserve believes the recent gains made by inflation will be temporary, and that the headline rate will be at or around its 2% level going into 2022. Investors are not so sure. Since the beginning of 3Q20, EPFR-tracked Inflation Protected Bond Funds have recorded inflows 40 of the 43 weeks through mid-April of this year. US Bank Loan Funds, meanwhile, have taken in fresh money all but one week year-to-date. During 2020 this fund group, traditionally viewed as a way to play rising short-term interest rates, posted outflows 41 of the year’s 52 weeks. Since inflation has – at least officially – been largely absent for over a decade, many of the investment strategies for dealing with it, such as focusing on precious metals, real estate, or other tangible assets, have a fair amount of dust on them. In this blog, we will look at this issue from the industry level, aiming to identify those that will fare best of the inflation’s recent gains prove not to be transitory. Read more...

    Topic Industry News

  • EPFR - fund flow & allocations data

    Pace of Green - Swiss ESG bonds ride market wave but buyers should beware

    Pace of Green

    ESG funds soaked up inflows again in March, and the Swiss bond market was the biggest sponge. Swiss environmental, social and governance (ESG) bond funds attracted a whopping $1.3 billion new investments, 9.1% of its total assets under management. This took total Swiss-based ESG bond assets to over $15 billion, according to fund flow data from EPFR. Swiss ESG bonds have received positive inflows in each of the last 12 months except one. But this momentum accelerated in February, when the Swiss stock exchange (SIX) launched 20 new ESG bond indices, all based on the Swiss Bond Index. SIX also introduced a filter system allowing investors to search for green, sustainability or sustainability-linked bonds...

    Topic Industry News ESG

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