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EPFR - fund flow & allocations data

Quants Corner - Finding value in negative flows

Quants Corner

Despite the strong rebound seen during November, this year has been a tough year – in flow terms – for both Emerging and Developed Markets Equity Funds. With one month of 2020 to go, net redemptions from all EM Equity Funds totalled $32 billion, while DM Equity Funds have seen $171 billion flow out. The net figure for DM Equity Funds would now be positive if a net $223 billion had not been pulled out of US Equity Funds. Although this group has been experiencing structural outflows for some time as retiring Baby Boomers rotate to less volatile asset classes, the sheer volume of the outflows is surprising given the performance of US equity markets...

Topic Industry News

IGM FX and Rates

FX Viewpoint – Seasonality in December?

FX & Rates

In our Q4 version of Oct 5, we concluded that 15-20 years ago, it was a good bet to short the DOLLAR. More recently, we have seen strength. We continued Q4 seasonality this year could come second to the potentially big drivers of COVID vaccine hopes, a resilient global economy, the Biden lead and Brexit, but BEARS might want to look at a LONG AUD/USD (but of course the RBA could well cut rates before the year is out). The last 20 years has seen an ave of +0.9% during Q4 and current standing is +2.5%. We added USD BULLS might consider a LONG USD/NOK. An ave win of +1.4% since 2000. A very short NOK market though has rocketed in this risk-on environment and the less said about the -5.0% USD/NOK losses the better! So far in the month's early exchanges, the USD is mostly slightly lower, from -0.03% AUD through to -0.3% CHF and EUR and -0.4% SEK. Only USD win so far is the tiny +0.1% YEN. How does the big DOLLAR tend to fare generally in the run-up to year-end? Further, are there any G10s that seem to perform particularly well/badly through Dec? For more read our FX Viewpoint Blog >

Topic Industry News

IGM Credit, IGM FX and Rates

China Insight: Deleveraging already starts to kick in, as per PBOC Q3 report

China Insight

PBOC Q3 monetary policy report released on 26 November reinforces our view that liquidity will be going tighter and deleveraging may be getting more prominent in the months ahead. The report, echoing the need to stabilize leverage, direct financing and control financial risk suggested by PBOC governor Yi Gang in a research paper published on 17 Nov, indicates second-phase deleveraging is kicking in, though it, in terms of magnitude, may be more gentle than the first-phase in 2017 (chart 1).

Topic Industry News

IGM FX and Rates

Viewpoint: RBI intervention here to stay but INR FX may do better in Q1 2021

IGM Viewpoint

- INR's underperformance in 2020 has been quite stark given the supportive balance of payments backdrop for the currency. The current account balance has shifted into surplus for the first time since 2004 and net FDI inflows have more than offset net portfolio outflows. INR FX is also cheap relative to our short term fair value model and has not caught up with the improved risk back drop reflected in higher equities. - This large divergence mainly reflects the RBI's continued aggressive FX intervention, which has seen FX reserves for the central bank rise sharply and offset the balance of payments surplus. - In this piece we outline the medium term drivers of RBI's FX intervention, which we feel are mainly geared around currency competitiveness. India inflation is generally higher than its trading partners, which means nominal FX appreciation needs to be contained to offset this trend, while India's share of global goods exports has stagnated in recent years. The country also has structural trade deficits with big manufacturing economy's like China. - We conclude that RBI FX intervention will remain a key feature of the INR FX landscape. - Still, there is a scope for the intervention pace to moderate from heady levels into 2021. Historically, stronger wholesale inflation pressures sees the pace of intervention slow as the authorities become more comfortable with some FX strength to offset imported inflation pressures. A continued recovery in global commodity prices suggests the risks for India's wholesale inflation outlook are skewed to the upside. - FX intervention also tends to come down when export and IP growth trends improve, which is also a risk as we move into early 2021. Coupled with the fact that Q1 tends to be the best quarter for INR FX from a seasonal stand point, suggests to us the market will use USD/INR spikes between now and year end as dollar selling opportunities. See the full note below for more details. Read on for more...

Topic Industry News

EPFR - fund flow & allocations data

Equity Funds pick up a retail tailwind for Thanksgiving

Global Navigator

Retail flows to EPFR-tracked Equity Funds during the week ending Nov. 25 hit their highest level since late 1Q06 as the prospect of effective anti-COVID-19 vaccines and a return to political normality in the New Year propelled benchmark US indexes to fresh record highs. US Equity Funds recorded their first retail inflow since mid-September and their biggest since early June, Global Equity Funds posted their 33rd retail inflow in the past 35 weeks and retail investors committed fresh money to China Equity Funds for the 23rd straight week. These Equity Funds are on track to challenge the monthly inflow record they set in January 2018, when the synchronized global growth narrative prompted investors to move off the sidelines. In addition to the revived retail flows, this group is also benefiting from the strong investor appetite for exposure to the socially responsible (SRI) or environmental, social and governance (ESG) themes. Funds with these mandates posted their second record inflow month-to-date as their year-to-date total climbed to $143 billion. Overall, Equity Funds recorded a collective inflow of $34 billion during the week ending Nov. 25 while Money Market Funds absorbed $4 billion and Bond Funds $9 billion. Investors pulled a net $58 million out of Alternative Funds and $1.8 billion from Balanced Funds.

Topic Industry News

IGM FX and Rates

Viewpoint: CBRT raises Lira prospects, but will policy shift be sustained?

Whilst the CBRT's efforts looks to have offered some light at the end of the tunnel for the Lira, the recent breather suggests it may still take some time to restore confidence back into the Turkish currency... read on for more...

Topic Industry News

PSN Separately Managed Accounts (SMA) Data

3Q 2020 PSN SMA Top Guns Winners Announced - The Great Recovery Rolls On

Q3 2020 PSN SMA Top Guns Insights

The stellar market recovery continued during the third quarter. The U.S. economy continued to stabilize, providing investors with optimism, resulting in equities (S&P 500 index) rising 8.93% during the quarter. Furthermore, the Federal Reserve (Fed) signaled that it will remain very accommodative in the years to come as expectations are for rates to remain near zero until 2023. However, equities fell late in the quarter due to a resurgence of coronavirus cases, while congress could not come to an agreement on an additional economic stimulus package. The risk-on environment, largely driven by accommodative monetary policy and the Fed’s change to its inflation policy, boosted corporate bonds, while 10-year Treasury yields rose three basis points to 0.68% during the quarter.

Topic Industry News

IGM FX and Rates

Viewpoint: EM Asia FX pullbacks likely to remain fairly modest

Asia FX

With EM Asia FX already trading at a premium to equity market sentiment, China credit wobbles and central bank rhetoric, we do not rule out further dips. Our short-term fair value models suggest the better value rests with higher yielding currencies…

Topic Industry News