Equity fund flows down, but not out, as Covid-19 hits global markets

April ended with another week of record highs for key equity indexes, oil prices holding around $100 a barrel, first quarter earnings reports pouring in and a slew of major central bank policy meetings. Against this backdrop, investors continued to rebuild their positions in riskier asset classes and boost their exposure to US stocks while cutting their leverage and their exposure to Europe.

The market euphoria that followed the announcement of a ceasefire between the US and Iran on April 7 soon ran into the painful reality that both sides remain far apart. But, despite the US blockade of the Straits of Hormuz, its momentum lifted benchmark US equity indexes to fresh record high and continued to drive a “risk on” rotation in the flows to and from EPFR-tracked fund groups.

For the second time in a row, the reporting period for EPFR-tracked funds ended with markets responding to hopes of an end to the fighting between the US and Iran and the accompanying energy shock. The upshot was a marked increase in risk appetite, which was reflected in the latest flow data. High Yield Bond Funds posted their first inflow since mid-February, flows into Private Credit Funds hit an eight-week high, and investors steered fresh money into Europe Equity, Bond and Money Market Funds.