EPFR - fund flow & allocations data

Focus on liquidity and yield in early 2Q21

During the first week of April benchmark US equity indexes climbed to new record highs, the IMF forecast full year growth of 6.4% for the world’s largest economy -- which added over 900,000 jobs in March – and US Federal Reserve officials reiterated their commitment to highly accommodative monetary policy. Against this backdrop, mutual fund investors headed in opposite directions. EPFR-tracked US Money Market Funds took in fresh money for the eighth time in the past nine weeks, a run that has seen these liquidity vehicles pull in over $170 billion, while flows to Emerging Markets and High Yield Bond Funds during the first week of the second quarter hit eight and 41-week highs respectively. Investors not stretching for yield or going liquid stuck with established reflationary and inflationary themes or looked to cut costs. Through the week ending April 7, Equity Funds with global mandates have posted inflows every week year-to-date, as have equity and bond funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates. Meanwhile Inflation Protected Bond Funds have absorbed fresh money for 21 straight weeks and Bank Loan Funds, traditionally used to play rising short-term interest rates, for 14 consecutive weeks. On the cost cutting front, there has been growing interest in Collective Investment Trusts (CITs). Like ETFs and mutual funds, CITs are pooled investment vehicles, but are not regulated by the SEC and have cost structures akin to separately managed accounts. EPFR’s coverage of CIT assets has grown fourfold over the past three years to over $850 billion, and in % of AUM terms these vehicles have been more popular with investors than ETFs or mutual funds.

Topic Industry News

IGM Credit

IGM Global Credit Snapshot

IGM Global Credit Snapshot | Wednesday, 8th April 2021 - Global issuance volumes picked up pace over March, with Q1 volumes strong - European and US high yield markets chalked up record first quarters. - Concerns over rising inflation and in turn higher US Treasury yields continue to entice issuers to fund sooner than later - However, IGM's sentiment metrics, which largely saw average NICs track higher, does suggest some selective investor resistance. - For specific regional highlights see below.

Topic Industry News

EPFR - fund flow & allocations data

Investors buy American in late March

The first quarter of 2021 ended with US Money Market, Equity and Bond Funds attracting a combined $68 billion as COVID-19 vaccination rates in the world’s largest economy continue to climb and stimulus fueled equity indexes hit fresh record highs. Only funds with global mandates enjoyed anything like the same level of flows during the final week of March, with Global Emerging Markets (GEM) and Global Equity Funds seeing year-to-date inflows hit $34 billion and $143 billion respectively and Global Bond Funds posting their biggest weekly inflow since early February. Investors continue to buy into funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates. But appetite for exposure to emerging markets assets dimmed appreciably in late March with flows to Emerging Markets Equity Funds running at less than a third of the levels seen in February and Emerging Markets Bond Funds ending the quarter by posting their fourth outflow in the past six weeks. Both US equity markets and flows to EPFR-tracked US Hedge Funds appeared to shrug off the implosion of Archegos Capital, which triggered forced sales of some stocks when it defaulted on margin calls from creditor banks, and Financial Sector Funds also ended the week with a solid inflow.

Topic Industry News

EPFR - fund flow & allocations data

Less than smooth sailing... What EPFR data and analysis tells us about the likelihood of greater volatility.

The VIX is in... Funds offering exposure to the most widely followed measure of US equity market volatility, the Chicago Board Options Exchange's CBOE Volatility Index (VIX), are seeing a surge in flows as investors pencil in a much bumpier ride in 2021 than they’ve experienced since the 2008-12 post-financial crisis period. Fears that global reflation will trigger higher-than-expected inflation, growing appetite for emerging markets exposure and the surge in retail involvement are among the factors fuelling this reassessment of likely volatility. On the surface, fear of volatility is running ahead of market – or realized – volatility. But analysis by EPFR, which will be discussed in future segments, suggests that by other measures underlying volatility is indeed picking up at a time when receptiveness to central bank guidance and actions is diminishing...

Topic Global Investment Flows

EPFR - fund flow & allocations data

Pace of Green - Global ESG standards seek cohesion, but face uphill challenge

The massive flows of money into environmental, social and governance (ESG) investments over 2020 continued into January and February, according to EPFR data. But, without better ESG reporting standards, this wave of money will fall short of the desired impact. Sustainable investing has long been hampered by patchy or confusing measurement and reporting, leaving the door open for some asset managers to make overly positive claims about the impact of their activities. As sustainable investing becomes more mainstream, investors will demand better, more standardized and comparable information. Asset managers, and those that guide and regulate them, will have to respond. But one major obstacle is the bewildering plethora of ESG standards and metrics that already exist. Turning these into a simple, cohesive set of standards could be like turning round a huge old tanker in a hurricane...

Topic Industry News

Digital Banking Research

Servicing unsecured loans: doing more on digital

Servicing unsecured loans: doing more on digital As with so many other financial services journeys, the process of managing a personal loan has been revolutionised in recent years by harnessing digital channels. As consumers have become used to more frictionless digital experiences in retail, media, and entertainment, their expectations for financial services have also changed. This trend has been further embedded as a result of the pandemic, which has forced both lenders and borrowers into digital channels. Findings from FBX’s Q1 2021 Unsecured Lending tracking show a range of approaches in enabling customers to service their loans digitally. The platforms of fintech lenders have several advantages over those of traditional lenders including a broader scope of loan management tools alongside more efficient processes...

Topic Industry News Digital Banking

EPFR - fund flow & allocations data

Volatility really could be different this time

After lying dormant for nearly a decade, volatility has started to rumble again. But the nature of volatility has changed, creating dangers and opportunities for investors. Market price swings have increased significantly since the start of the Covid-19 pandemic early last year. The volatility of global shares nearly tripled between 2019 and 2020; and the CBOE Volatility Index (Vix) remains at heightened levels compared to the last nine years. This comes when the world’s central banks have fired off unprecedented amounts of policy ammunition; the pandemic has injected uncertainty into daily life; environmental, social and governance (ESG) principles are disrupting long-established business models; and many assets have record-high prices. While some active managers may welcome greater volatility as a chance to display their tactical skills, most investors would rather it stayed low - especially the growing cohort of retirees. But how different will volatility be in the coming 18 months? And what are the options for avoiding it?

Topic Industry News

EPFR - fund flow & allocations data

A rising tide lifts some (Japanese) boats: The Bank of Japan’s ETF purchases and their impact on market signals for individual stocks

A rising tide lifts some (Japanese) boats “Purchases [of Japanese ETFs] by the Bank of Japan have been increasing. Such large and longstanding purchases of stocks by a central bank are rare in the world. It must be important to examine the effects of purchases of ETFs by the central bank,” Hideki Hanaeda, and Toshio Serita observed in the preamble to their paper, Effects of Nikkei 225 ETFs on Stock Markets: Impacts of Purchases by Bank of Japan, that was presented at the 30th Australasian Finance and Banking Conference in 2017. At the time of their presentation the BOJ was seven years into its ETF Purchasing Program, launched in early 4Q10 and expanded in 2013 as part of the “three arrows” policy launched by then Prime Minister Shinzo Abe to snap Japan out of the deflationary slowdown that started in 1991 and came to be known as the lost decades. It’s ETF holdings at the end of the year totaled some $175 billion with unrealized gains that added another $50 billion to the value of those holdings...

Topic Global Investment Flows