US - Investors have fled from funds investing in riskier assets such as high yield bonds and emerging market equities bonds on the back of US consumer inflation data and the Federal Reserve's expression of concern about inflation pressures in the economy, according to Emerging Portfolio Fund Research (EPFR).
The company said investors continued to favour funds offering broader exposure to global markets such as global equity funds and global bond funds, both of which received “healthy inflows” in the last week, while resuming net redemptions from US equity funds.
“The current state of investor sentiment and fund flows are similar to that of April and May when sudden concerns about inflation and the potential for more aggressive interest rate rises sent Treasury yields soaring and emerging market assets, and fund flows, plummeting,” said Brad Durham, a managing director of EPFR.
According to EPFR, emerging market bond funds tracked by the firm posted their first weekly outflow in 21 weeks last week. High yield bond funds also experienced their worst outflows of the year.
Global/international equity funds took in US$768.7m of net inflows during the week while US equity funds lost US$163.2m to outflows.
Global bond funds continued to take in fresh money, taking total year to date inflows to US$4.83bn, EPFR said.
“Institutional demand for euro-denominated debt at the long end of the curve held up, and some investors went bargain hunting on the theory that the Bank of Japan and the European Central Bank will not be raising interest rates, and thus putting pressure on bond prices, any time soon,” commented Cameron Brandt, EPFR global markets analyst.
“They are basing this theory o lacklustre growth in Germany, Italy and Japan.”
EPFR tracks flows from its universe of 8000 international and emerging market funds with more than US$3trn in assets, showing trends in global institutional and individual investor sentiment.
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