Investors Dump U.S. Equity Funds, Shift Back Into Bonds

Feb 7 2014, 5:14pm CST | by

Investors Dump U.S. Equity Funds, Shift Back Into Bonds

U.S. investors sold mightily out of equity funds in the first week of February and are rotating back into bonds, the fund tracking firm EPFR Global said on Friday.

Institutional redemptions from EPFR Global-tracked U.S. equity funds and commitments to U.S. bond funds both set new records in dollar terms going into February as markets around the world continue to struggle with the shift in monetary policy, China’s slower growth and the cautious tone of the latest corporate earnings forecasts.

EPFR said this “mini-rotation” by institutional investors meant a new inflow record for all bond funds and a new outflow record for all equity funds during the week ending Feb. 5.  In all, outflows from all equity funds totaled $28.3 billion, with emerging markets equity funds accounting for a fifth of that total. Meanwhile, investors poured a net $14.7 billion of fresh money into bond funds.

When measured in percentage of assets under management terms the flows into bond funds were the biggest since early second quarter 2010 and the redemptions from equity saw the largest sell off since the third quarter of the same year. Institutional commitments to all bond funds, in these terms, hit levels last seen in the first quarter of 2006, EPFR said.

Outflows from U.S. equity funds during the first week of February dragged the overall number for all EPFR Global-tracked developed market equity funds to its lowest level since the week ending June 25, 2008, when net redemptions hit $23.7 billion.

Bonds are definitely back, thanks to talk of Fed tapering. But that depends on who is issuing the debt.

Flows into EPFR Global-tracked bond funds rose during the week ending February 5  with Treasury bond funds attracting fresh institutional commitments.  However, investors continued to sell Asian and emerging market  bond funds.  Plus a weekly outflow of $1.2 billion was registered in high yield funds in general. With the weak growth and talk of deflation putting European central banks under pressure to loosen monetary policy, flows into European bond funds hit a 40 week high.

Source: Forbes Business


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