Going into the second half of October, investors continued to tune out the noise surrounding Sino-US trade relations and buy into the strong year-to-date performance delivered by both countries’ stock markets. During the latest week, EPFR-tracked US Equity Funds absorbed another $12 billion while mainland China-mandated funds recorded their second largest inflow during the past 12 months.
Investors are also discounting concerns that artificial intelligence (AI) stocks are close to, if not in, ‘bubble’ territory, with Technology Sector Funds posting their second weekly inflow record since mid-September. But they did pull back from riskier fixed income fund groups and kick the tires on the European reflation and rearmament story. Europe Equity Funds tallied their second consecutive outflow, and their fifth over the past nine weeks, while Europe Bond Funds recorded their second-lowest total since mid-April.
Exchange traded funds (ETFs) remain the vehicle of choice, with year-to-date flows into all Equity, Bond, Balanced, Money Market and Alternative ETFs at the end of the third quarter exceeding $1.4 trillion and the total AUM for all EPFR-tracked ETFs hitting $18 trillion.
Overall, the week ending Oct. 15 saw all Equity Funds pull in $28.1 billion while $1.2 billion flowed into Balanced Funds, $4.7 billion into Alternative Funds and $5.8 billion into Bond Funds. A net $24.5 billion was redeemed from Money Market Funds.
At the asset class and single country fund levels, High Yield Bond Funds posted their biggest outflow since the second week of April, redemptions from Convertible Bond Funds hit a 28-week high and Collaterized Loan Obligation (CLO) Funds posted their smallest inflow in over four months. Sweden Equity and Bond Funds tallied their biggest outflows in eight and 27 weeks, respectively, Hong Kong (SAR) Equity Funds recorded a third straight outflow for the first time since late May and flows into Brazil Bond Funds climbed to a level last seen in mid-2Q24.
Emerging Markets Equity Funds
With flows into funds dedicated to mainland Chinese stocks soaring during the second week of October, EPFR-tracked Emerging Markets Equity Funds chalked up their ninth consecutive inflow and their biggest in over seven months. Three of the four major regional groups took in fresh money and Frontier Markets Equity Funds snapped their longest redemption streak since 3Q21.
Leveraged EM Equity Funds attracted fresh money for only the fourth time during the past six months, funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates chalked up their ninth straight inflow and flows into EM Dividend Funds climbed to a 12-week high.
Flows into China Equity Funds rebounded as domestic investors returned from the annual ‘Golden Week’ holidays and markets recovered swiftly from US President Donald Trump’s latest tariff threats. Funds dedicated to Chinese state-owned enterprises (SOEs) recorded their biggest inflow since mid-February and the flows broadened to encompass Greater China and Taiwan (POC) Equity Funds, with flows to the latter hitting a 17-week high.
Beyond Greater China-mandated funds, there was little enthusiasm for other Asia ex-Japan Country Fund groups. India Equity Funds racked up their 11th outflow over the past 12 weeks as investors mulled the broader impact of any shift away from cheap Russian oil imports and Korea Equity Funds recorded their fourth outflow during the past six weeks despite the steady flows into foreign domiciled funds.
Actively managed Asia ex-Japan Regional Equity Funds have been rotating exposure to China and Korea this year at the expense of India and, to a lesser extent, Indonesia and Taiwan. In the case of India and Taiwan they are taking the opposite tack from their passively managed counterparts.
With rare earth supplies and other clean energy inputs back in the spotlight due to the trade friction between the US and China, investors looking to Latin America focused on two countries with significant reserves of copper, lithium and other raw materials. Chile Equity Funds recorded their fifth inflow over the past six weeks and flows into Peru Equity Funds climbed to their highest level since late March.
Among the EMEA universe, South Africa’s gold story continues to resonate with investors who committed nearly $100 million to South Africa Equity Funds and boosted flows into Africa Regional Funds. But a lackluster outlook for oil prices weighed on Saudi Arabia Equity Funds, with redemptions hitting year-to-date highs for the second week running.
Developed Markets Equity Funds
With America flying by far the biggest flag among developed markets when it comes to developing artificial intelligence (AI), flows to EPFR-tracked Developed Markets Equity Funds during the second week of October went predominantly to US Equity Funds. Among the other major groups, Europe Equity Funds posted an outflow, Japan Equity Funds just avoided doing so and flows into Global Equity Funds fell to their lowest level since early August.
In the contest between bulls and bears, flows into all Leveraged Developed Markets Equity Funds climbed to a 27-week high while all DM Bear Funds chalked up their biggest collective outflow since the final week of February. The recent trend, however, strongly favors Bear Funds.
The latest flows into US Equity Funds extended their longest run of inflows since the first quarter. Investors favored diversified exposure to big names, with Large Cap Blend Funds again the biggest contributors to the headline number for all funds while dedicated US Technology Sector Funds accounted for less than a sixth of the total. Retail share classes posted their biggest collective outflow in over 10 months and overseas domiciled funds experienced net redemptions for the first time since the first week of August.
Overall flows to Europe Equity Funds were again colored by significant redemptions from UK Equity Funds, which are facing a variety of headwinds ranging from low expectations for the British economy to selling by pension funds in the run-off stage of their lifecycle. But there was little interest in fund groups dedicated to core EU and Eurozone markets. France Equity Funds posted their 14th outflow during the past 15 weeks and Germany Equity Funds their eighth since mid-August, redemptions from Spain Equity Funds climbed to a 34-week high and Austria Equity Funds extended an outflow streak that started in early July.
Japan Equity Funds eked out a minimal collective inflow which was less than a third of the amount committed to Australia Equity Funds. Expectations that Sanae Takaichi’s victory in the latest Liberal Democratic Party leadership contest would lead to her becoming Japan’s first female prime minister have, for now, cooled as political parties discuss alternative scenarios and maneuver for concessions.
The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, recorded their 37th inflow of the year so far. Funds with ex-US mandates took in roughly $300 million more than their fully global counterparts.
Global sector, Industry and Precious Metals Funds
With the earnings season in full swing, major US banks – Wells Fargo, Goldman Sachs, and JPMorgan – opened on a strong note. Even though their reports and forecasts were tempered by caution, with mentions of tariff uncertainty, geopolitical complexities and inflation persistence, sector-oriented investors focused on the positive in mid-October. For the second time in the past three weeks, 10 of the 11 major EPFR-tracked Sector Fund groups reported inflows.
Total trading value for all fund groups reached an all-time high of $19.3 billion. More than half of that was directed by a record-setting $10.3 billion inflow for Technology Sector Funds, two cyclical sectors, Financials and Commodities, took in a collective $5.5 billion, and flows into Healthcare Sector Funds topped $1.5 billion for a second consecutive week.
It was a record-setting week for Commodities/Materials Sector Funds as well. The latest inflow extended the group’s current streak to 15 weeks and $16.8 billion, of which Gold Funds accounted for a third. Chemicals, Non-Ferrous Metals, and Silver Funds each attracted between 13% and 16% of the headline number.
For the first time since early 2Q this year, Silver Funds experienced consecutive outflows, while Gold Funds posted an eighth straight inflow. Monthly flows for the latter precious metal have been negative just twice since May of last year, and the latest September figure exceeded $20 billion, by far their highest monthly total.
At the very tail end of the latest reporting period, stellar 3Q25 numbers from Taiwan Semiconductor Manufacturing and news of Apple’s M5 chip attracted significant attention. In anticipation, investors committed over $100 million to 35 ETFs in the Technology Sector Fund group. Flows into Leveraged Technology ETFs were the largest since early April, topping $1 billion with Nvidia, Bitmine and Microsoft among the single-stocks funds with the biggest inflows.
Bond and other Fixed Income Funds
Although EPFR-tracked Bond Funds extended their current inflow streak during the second week of October, the headline number was the smallest since the final week of April and there was a marked reduction in risk appetite. Emerging Markets Bond Funds posted their first outflow in seven months, redemptions from both High Yield Bond and Bank Loan Funds hit a 27-week high and Europe Bond Funds posted their fifth smallest collective inflow year-to-date.
Some of the investor caution in mid-October sprang from the fact that the US government shutdown means the Federal Reserve’s data-driven approach to setting interest rates is missing some key inputs. However, analysis by EPFR sister company CEIC suggests that inflationary trends are supportive of further rate cuts during the current quarter.
At the asset class level, Mortgage Backed Bond Funds narrowly sustained their current inflow streak, Inflation Protected Bond Funds posted consecutive weekly outflows for the first time since early July, money flowed out of Convertible Bond Funds for a fifth straight week and redemptions from Bond Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates climbed to a seven-week high.
US Bond Funds posted another solid inflow that favored funds with sovereign mandates and included fresh money finding its way to overseas domiciled funds for the 17th straight week. US Municipal Bond Funds accounted for a fifth of the headline number and US Ultra Short Term Bond Funds recorded their 27th consecutive inflow.
Investors looking to Europe took a different tack, with Europe Sovereign Bond Funds posting their biggest collective outflow since mid-4Q24 while funds with corporate mandates chalked up their 24th inflow over the past 25 weeks. At the country level, flows into Italy Bond Funds exceeded $100 million for the seventh time so far this year while outflows from Denmark and Sweden Bond Funds jumped to 15 and 28-week highs, respectively.
Asia ex-Japan Country Fund groups drove the latest outflow from all Emerging Markets Bond Funds, with Korea Bond Funds posting their biggest outflow since early 4Q24 and China Bond Funds since mid-4Q22. In the case of China-dedicated fund, the investor base that steered record-setting sums into those funds during the second and third quarters have shifted their attention to China’s stock markets.
Among funds dedicated to Developed Asian markets, Japan Bond Funds stood out, posting their biggest inflow since early 4Q23.
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