EPFR-tracked Japan Equity Funds suffered record-setting redemptions during the fourth week of May as another underwhelming Japanese government bond auction prompted investors to cut their exposure, as per the latest release by EPFR.
However, with all four of the major regional groups posting inflows and China Equity Funds seeing fresh money for the first time since the third week of April, collective flows for all EPFR-tracked Emerging Markets Equity Funds hit a seven-week high going into the final days of May.
Incidentally, the shift in sentiment did not extend beyond institutional investors, with retail share classes adding to a redemption streak that started last July. Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates and EM Dividend Equity Funds tallied modest inflows while Leveraged EM Equity Funds experienced net redemptions for the fifth time during the past six weeks, added the release.
In the case of Japan, expectations that governments will have to pay more to sell their debt also weighed on other Developed Markets Equity Fund groups, with US and Canada Equity Funds both posting outflows and Europe Equity Funds pulling in less than $1 billion for only the third time during the past three months.
Of the more than $11 billion peeled away from Japan Equity Funds during the week ending May 28, some $8 billion came from three ETF’s benchmarked to the Topix index. Retail share classes recorded modest inflows, as did foreign domiciled Japan Equity Funds, but uncertainty about Japan’s interest rate and debt dynamics kept investors on edge.
At the single country and asset class fund levels, China Bond Funds posted their biggest inflow since mid-1Q21, flows into Turkey Money Market Funds hit a new record high and Sweden Equity Funds chalked up their 10th outflow over the past 12 weeks.
Physical Gold Funds snapped their longest run of outflows since 2Q24, Synthetic Funds tallied their biggest collective inflow in over three months and Inflation Protected Bond Funds tallied their 18th inflow since the second week of the year.
The prospect of higher yields, and market discipline improving credit quality, drew another $19.2 billion into Bond Funds, while Alternative Funds absorbed another $4.3 billion as some investors turned to Physical Gold and Cryptocurrency Funds.
Elsewhere, Balanced Funds saw $1.2 billion flow out and Money Market Funds $18 billion while Equity Funds experienced net redemptions of $9.5 billion.
The outflows from Equity Funds again bypassed actively managed exchange traded funds (ETFs), which have seen their collective AUM grow sevenfold since the beginning of the current decade compared to the 50% increase seen by passively managed Equity ETFs. The last time actively managed Equity ETFs posted a monthly outflow was September 2019.
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