Bond funds feel the squeeze in late January

Although fears of a Russian strike at the Ukraine border briefly roiled global markets during the fourth week of January, mutual fund investors continued to focus on the degree and timing of tighter US monetary policy. Ahead of the US Federal Reserve’s first meeting of 2022, EPFR-tracked Bond Funds posted their biggest weekly outflow in over 10 months and extended their longest redemption streak since the pandemic-driven sell-off in late 1Q20.

The combination of taper and geopolitical concerns did give Gold Funds a shot in the arm. Flows to this group surged to levels last seen in mid-3Q20. But investors were reluctant to bail out of US Equity Funds in general and US Technology Sector Funds in particular, despite the Fed’s confirmation that it expects to start hiking interest rates at its March meeting.

Funds with socially responsible (SRI) and environmental, social and governance (ESG) mandates again showed their ability to swim against the tide, with SRI/ESG Bond Funds recording a collective inflow of $1.42 billion while $11.5 billion flowed out of all non-SRI/ESG Bond Funds. SRI/ESG Equity Funds, meanwhile, posted their 87th consecutive inflow. During that run they have pulled in over $420 billion.

Other ports in the current storms include funds dedicated to the big Asian markets – with China focused funds to the fore – and Bank Loan Funds. The latter, used to play rising short-term interest rates, have now taken in fresh money for eight straight weeks and 54 of the past 56.

Exchange Traded Funds (ETFs) continue to pull in significantly larger sums than their actively managed counterparts. Year-to-date through Jan. 26, Bond Funds have surrendered $5 for every $1 committed to Bond ETFs. In 2021 they took in twice as much money as their ETF counterparts. For Equity ETFs, the flow ratio is even more in their favor than the 14:1 margin seen last year.

At the asset class and single country fund levels, investors pulled over $4 billion from High Yield Bond Funds, outflows from Municipal Bond Funds climbed to a 94-week high and Mortgage-Backed Bond Funds extended their longest outflow streak since an 11-week run ended in 1Q17. Redemptions from Norway, Belgium and Spain Bond Funds hit 52, 61 and 75-week highs, respectively, while France Equity Funds posted consecutive weekly inflows for the first time since 3Q20.

Did you find this useful? Get our EPFR Insights delivered to your inbox.

Related Posts

Politics snapping at Europe’s heels

Politics snapping at Europe’s heels

The aftershocks of the European Parliamentary elections continued to reverberate during the second week of June, with French leader Emmanuel Macron calling a snap election that falls either side of the July 4 vote called by British Prime Minister Rishi Sunak two weeks earlier.

Investors find reasons to move in early June

Investors find reasons to move in early June

The first week of June ended with investors digesting the results of general elections in South Africa, India and Mexico, and looking ahead to key central bank policy meetings and further elections in the UK and European Union. They responded by gravitating to Taiwanese (POC) and Indian equity, most bond categories and cash, with EPFR-tracked Money Market Funds absorbing over $45 billion and flows into Bond Funds hitting their second highest weekly total year-to-date.

Funds benchmarked to Bitcoin drive alternatives

Funds benchmarked to Bitcoin drive alternatives

With election results for South Africa, India and Mexico looming and key central bank meetings on the horizon, investors generally took a wait-and-see stance in late May. Net flows, in % of AUM terms, for all Equity, Bond and Money Market Funds came in at 0.01%, 0.07% and 0.08%, respectively. Only two of the 11 major Sector Fund groups posted inflows for the week and both the major multi asset groups, Total Return and Balanced Funds, experienced net redemptions.

Better, More Actionable Insights

Let us show you how EPFR can create value for your specific strategy