Money market, equity and bond funds recorded net inflows of $6.8 billion, $1.56 billion and $35 million worldwide in the last week of January, according to EPFR Global. The US-based firm tracks the fund flows and asset allocations of more than 15,000 equities, fixed-income, and hedge funds domiciled globally with $11 trillion in total assets.
Equity markets, in particular, got a reprieve from extended losses due to hopes that the new US administration will fast-track additional moves to stabilise the country's financial sector, perhaps by creating a new public fund to hold toxic assets.
At the country and regional level, Brazil equity funds had a strong week, reflecting the renewed enthusiasm for commodities, but redemptions from emerging Europe regional funds were the highest in 13 weeks, while Middle East regional equity funds posted outflows for the 26th time in 27 weeks, and investors removed money from Russia equity funds for the 11th consecutive week.
Although the US Federal Reserve's latest meeting ended with no immediate shifts in policy or rates, its discussion of buying government debt if necessary was viewed as another encouraging sign that policymakers in the world's largest economy are picking up the pace, according to EPFR.
Investors continued their steady retreat from Japan equity funds last week, pulling another $183 million out of this fund group which has now posted outflows for 17 straight weeks. Domestic spending dropped 2.7% in December, adding to the pressure on an export-dependent economy that has seen overseas demand plummet as the safe-haven flows strengthened the yen.
Investors also removed a net $867 million from global equity funds, pushing year-to-date flows into negative territory. But the other diversified fund groups geared primarily to developed markets - Pacific equity funds - recorded modest inflows for the fourth time in the past five weeks.
Since the new year there has been a clear split in the fortunes of the four Bric markets, EPFR says, with investors gravitating towards China and Brazil at the expense of Russia and, to a lesser extent, India. China equity funds absorbed a net inflow of $43 million for the week, the eighth time in 10 weeks they have recorded inflows.
Real estate and commodities sector funds stood out among EPFR Global-tracked sector funds in late-January, with the former having their best week since mid-November and the latter taking in fresh money for a seventh consecutive week. In both cases a combination of low interest rates and signs that things may be bottoming out has attracted investors.
"There is so much cash on the sidelines that in these periods when some investor confidence returns, we're seeing flows move back into the most beaten down asset classes like real estate," says Brad Durham, a Massachusetts-based EPFR managing director. "US home sales were better than expected in December - although there were a lot of foreclosures buried in the data - and the news on the commodities front has piled one capacity reduction or capital expenditure cut on top of another, suggesting supply and demand may come back into balance a bit sooner than many expect."