Investors turn to riskier assets
EPFR Global data shows net inflows of $1 billion each to Asia ex-Japan and diversified global emerging markets equity funds.
Investors took a net $32.4 billion out of money market funds in the final week of April, and moved some funds to emerging markets equity, technology stocks, and high-yield debt, according to EPFR Global, which tracks around $10 trillion in assets in traditional and alternative funds worldwide.
Global, Japan, Pacific, Europe and US Equity Funds posted outflows for the final week of April, as did a majority of the major sector and bond fund groups.
ôInvestors are getting more risk back in their portfolios it seems clear from recent fund flow data, such as the four straight weeks of inflows into high yield bond funds, four of five weeks of inflows into emerging market equity funds and inflows into small-cap US equity funds in two of the last three weeks,ö says Brad Durham, Massachusetts-based managing director at EPFR Global.
The strong flows into high yield bonds are especially noteworthy, Durham says, since the nearly $2 billion of inflows into these funds over the past four weeks is the strongest since the first quarter of 2007. In April, high yield bonds in the US and Europe had their biggest rally in five years.
At the country level, sentiment towards China continues to thaw despite the inflationary pressures and tougher earnings environment evident in emerging AsiaÆs biggest economy and investors keep rotating exposure from Hong Kong to Taiwan in anticipation that Chinese capital will start flowing to the latter. Korea Equity Funds, meanwhile, snapped their 17-week losing streak.
The shifts in fund flows took place in the run-up to the latest US Federal Reserve meeting.
As expected, the US Federal Reserve cut its benchmark interest rate by another 25 basis points on April 30 while signalling that it may now shift to a neutral bias.
US equity funds posted net outflows of $2.83 billion for the week, with the bulk of that money coming from large-cap growth and large-cap blend funds.
The fact that ôsmall- and mid-cap US equity funds had inflows is another bullish sign,ö says EPFR Global senior analyst Cameron Brandt. ôBut that signal is somewhat muted by the fact that value-oriented funds generally did better than growth funds in both performance and flow terms.ö
Although the latest rate cut did not trigger another bout of US dollar weakness to add to the pressure on Japanese and European exporters, investors pulled money out of Japan equity funds for the 54th time in the past 56 weeks as industrial production, household spending and exports fell going into the second quarter while inflation drove up the price of consumer staples and energy. The outflows came despite the fifth set of fair to good performance figures from these funds for the past six weeks.
For the third time in four weeks, emerging markets equity funds posted strong inflows as investor appetite for riskier asset classes has been partially restored in recent weeks. Investors committed over $1 billion apiece to Asia ex-Japan and diversified global emerging markets equity funds.
Flows into Asia ex-Japan funds, which took in a net $1.4 billion as they recorded their sixth straight week of positive performance, were underpinned by renewed interest in Chinese equity and enthusiasm for TaiwanÆs post-election story. China equity funds absorbed $577 million for the week ending April 30, the fifth time they have posted inflows during the past six weeks, as optimism about US demand and the effects of a deep cut in the tax on share trades offset concerns about inflation and pressure on corporate earnings.
Global, Japan, Pacific, Europe and US Equity Funds posted outflows for the final week of April, as did a majority of the major sector and bond fund groups.
ôInvestors are getting more risk back in their portfolios it seems clear from recent fund flow data, such as the four straight weeks of inflows into high yield bond funds, four of five weeks of inflows into emerging market equity funds and inflows into small-cap US equity funds in two of the last three weeks,ö says Brad Durham, Massachusetts-based managing director at EPFR Global.
The strong flows into high yield bonds are especially noteworthy, Durham says, since the nearly $2 billion of inflows into these funds over the past four weeks is the strongest since the first quarter of 2007. In April, high yield bonds in the US and Europe had their biggest rally in five years.
At the country level, sentiment towards China continues to thaw despite the inflationary pressures and tougher earnings environment evident in emerging AsiaÆs biggest economy and investors keep rotating exposure from Hong Kong to Taiwan in anticipation that Chinese capital will start flowing to the latter. Korea Equity Funds, meanwhile, snapped their 17-week losing streak.
The shifts in fund flows took place in the run-up to the latest US Federal Reserve meeting.
As expected, the US Federal Reserve cut its benchmark interest rate by another 25 basis points on April 30 while signalling that it may now shift to a neutral bias.
US equity funds posted net outflows of $2.83 billion for the week, with the bulk of that money coming from large-cap growth and large-cap blend funds.
The fact that ôsmall- and mid-cap US equity funds had inflows is another bullish sign,ö says EPFR Global senior analyst Cameron Brandt. ôBut that signal is somewhat muted by the fact that value-oriented funds generally did better than growth funds in both performance and flow terms.ö
Although the latest rate cut did not trigger another bout of US dollar weakness to add to the pressure on Japanese and European exporters, investors pulled money out of Japan equity funds for the 54th time in the past 56 weeks as industrial production, household spending and exports fell going into the second quarter while inflation drove up the price of consumer staples and energy. The outflows came despite the fifth set of fair to good performance figures from these funds for the past six weeks.
For the third time in four weeks, emerging markets equity funds posted strong inflows as investor appetite for riskier asset classes has been partially restored in recent weeks. Investors committed over $1 billion apiece to Asia ex-Japan and diversified global emerging markets equity funds.
Flows into Asia ex-Japan funds, which took in a net $1.4 billion as they recorded their sixth straight week of positive performance, were underpinned by renewed interest in Chinese equity and enthusiasm for TaiwanÆs post-election story. China equity funds absorbed $577 million for the week ending April 30, the fifth time they have posted inflows during the past six weeks, as optimism about US demand and the effects of a deep cut in the tax on share trades offset concerns about inflation and pressure on corporate earnings.
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