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Money flows

Money market outflows remaining on sidelines ahead of US elections

The final 14 days of October saw over USD40bn flow out of EPFR-tracked money market funds, with USD28bn redeemed in the week ending 31 October.

But a combination of mixed earnings reports, the Eurozone’s ongoing crisis, Hurricane Sandy and the impending US elections deterred investors from putting that cash to work, with only USD5bn – a seven week low – finding its way into bond funds and USD2.8bn into equity funds.
Further evidence the Chinese economy has bottomed out helped sustain the recent appetite investors have shown for emerging markets exposure. Emerging markets equity and bond funds extended their current inflow streaks to eight and 21 consecutive weeks respectively. But, with the exception of China equity funds, interest in fund groups tied to a single market ranged from subdued to nonexistent.
Flows into several higher risk, higher return fixed income fund groups also slowed or stumbled. High yield bond funds posted outflows for only the second time since the beginning of the third quarter and flows into mortgaged backed bond funds were the smallest year-to-date. Inflation protected bond funds, meanwhile, had their best week since early May.
Investors continued to back their perception that China’s economy has turned a corner with hard cash, committing another USD600m to China equity funds during the final week of October as EPFR Global-tracked emerging markets equity funds extended their current winning run to eight weeks and nearly USD12bn. But they snapped the longest inflow streak Latin America equity funds had managed since 4Q10 and pulled money out of EMEA equity funds for the fourth week running.
EPFR Global-tracked sector funds experienced another lacklustre week to end October, with flows ranging from net redemptions of USD149m for healthcare/biotechnology sector funds to an inflow of USD337m into real estate sector funds.

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