The search for stable outcomes and yields helped steer another $23 billion into Bond Funds during the first week of August, continuing a trend that has gathered momentum since late April. But previously high-flying Alternative Funds hit a down draft, and Equity Funds recorded their biggest nominal weekly outflow since EPFR started tracking them in 1995.
However, the headline number for all Equity Funds hinged on redemptions from three funds with US, Japan and global ESG mandates managed by Blackrock. “Although sentiment towards these asset classes has been subdued for much of this year, we believe these particular outflows are driven by a small number of investors making adjustments to their investment holdings based on technical rather than macro considerations,” noted EPFR Research Director Cameron Brandt.
The shock of weaker-than-expected US jobs data and the passing of the August 1 deadline for new US tariffs did prompt investors to cut risk in a number of areas. Alternative Funds saw a 16-week run of inflows come to an end, redemptions from Cryptocurrency Funds hit a 21-week high while Catastrophe Bond Funds posted their biggest outflow since 1Q22 and Regional Bank Funds their biggest since the first week of March.
US and Europe Money Market Funds enjoyed above average flows, with the former posting their biggest inflow since the first week of the year and Europe Money Market Funds since the first week of May.
At the single country and asset class fund levels, flows into Australia Bond Funds climbed to a 16-week high, New Zealand Equity Funds chalked up their biggest outflow since early April and Thailand Equity Funds extended a redemption streak stretching back to the beginning of last year. Outflows from Bear Funds climbed to a 17-week high, Total Return Bond Funds took in fresh money for the 13th straight week and dedicated Artificial Intelligence (AI) Funds chalked up their 37th inflow over the past 39 weeks.
Emerging Markets Equity Funds
EPFR-tracked Emerging Markets Equity Funds started August by posting their biggest collective outflow since the third week of May as the August 1 deadline for new US tariffs arrived and the outlook for global economic growth remained cloudy. The diversified Global Emerging Markets (GEM) Equity Funds saw their longest inflow streak since 2Q21 come to an end and Asia ex-Japan and Latin America Equity Funds also experienced net redemptions.
Retail support for this asset class remains largely absent, with retail share classes turning in their 51st collective outflow over the past year. When filtered by domicile, redemptions from Europe and US domiciled EM Equity Funds came in at 10 and 16-week highs, respectively, while funds based in Canada recorded their biggest outflow since late March.
All of the major Asia ex-Japan Country Fund groups posted outflows during the week ending August 6 that ranged from $72 million for Korea Equity Funds to $1.1 billion for funds dedicated to mainland China. In the case of Korea Equity Funds, which saw net redemptions for the first time since mid-June, investors are digesting the implications of the recent trade deal with the US, the impact of official measures to prevent a housing bubble in Seoul and the government’s push for higher capital gains taxes.
In a recent note to clients, EPFR sister company CEIC wrote that Korea’s central bank, “faces a policy dilemma: lowering rates supports domestic growth, but also could risk fueling a real-estate bubble. [It] has emphasized financial stability concerns – particularly regarding the Seoul housing market and households’ leverage – as a key policy consideration. As of Q1 2025, household debt amounted to over 90% of GDP – one of the highest ratios in the world, trailing only Australia and Canada. Not only does this put borrowers’ finances and the economy at risk of a downturn; mortgage costs could also crowd out consumer spending.”
India Equity Funds tallied their biggest outflow in nearly six months as trade talks with the US stalled over the question of Indian purchases of Russian oil in defiance of US and European sanctions.
The question of tariffs and trade with the US also hangs over Mexico and Brazil. Funds dedicated to both markets posted an outflow during the latest week, with redemptions from Mexico Equity Funds climbing to their highest level in 13 months.
EMEA Equity Funds were the only major group to record an inflow despite the fourth straight outflow from Turkey Equity Funds, only the third outflow from Poland Equity Funds since the beginning of the second quarter and the biggest outflow from United Arab Emirates (UAE) Equity Funds since the second week of April.
Developed Markets Equity Funds
The headline number for all EPFR-tracked Developed Markets Equity Funds during the first week of April was skewed by some sizable, isolated redemptions from US, Japan and Global Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates. As such, interpreting the biggest collective outflow for the group since late 2021 requires caution.
These groups recording outflows is not surprising given the backdrop of tariff deadlines, concerning US employment data, and the persistence of inflationary pressures in key markets. Europe Equity Funds, which were not impacted by the redemptions from a single manager, posted their first outflow since mid-June and biggest since early April. At the country level, flows into Germany Equity Funds rebounded to a five-week high as Germany’s government released a budget draft that increases borrowing and public investment. But loose fiscal policy is less welcome for investors looking at France, with France Equity Funds extending their longest outflow streak since the first quarter.
The overall flows for US Equity Funds were mainly concentrated in Large Cap Blend Funds, though US Mid Cap Value Funds did see their first inflow since the third week of June. Analysis of US Sector Fund flows by Senior Liquidity Analyst Winston Chua highlights the shift this year to more defensive groups, although investors’ love affair with artificial intelligence and the technology companies behind is proving resilient.
Japan Equity Funds posted their eighth outflow during the past two months. While outflows from a single fund colored the headline number, sentiment inside and outside the world’s third largest economy remains fragile. After recovering in May and June, Japanese consumers’ confidence slipped again in July as inflation weighs on their purchasing power.
Global sector, Industry and Precious Metals Funds
For the 11 major EPFR-tracked Sector Fund groups, the total trading volume (the absolute value of outflows + inflows) reached a six-week high in early August. Inflows for a single fund lifted the headline number for Telecoms Sector Funds all the way to $2.6 billion during the first week of August, topping the $1.6 billion figure seen by Technology Sector Funds. Four more groups were in positive territory, while redemptions averaged $345 million for the remaining five sectors.
After six straight weeks that pulled in $8.4 billion total, Financials Sector Funds saw their inflow streak end. Redemptions from US-dedicated funds outweighed the roughly $740 million that collectively flowed into China and Canada Financials Sector Funds. A custom grouping of Bank Funds, excluding regional banks and US dedicated funds, posted their eighth consecutive weekly inflow, driven by those two countries.
The inflow for Telecom Sector Funds is likely to reverse in the coming week, a pattern seen during the group’s previous record weekly inflow. In the week to March 13 last year, $1.5 billion flowed in, followed by – in the week to March 20 – a record redemption of $1.7 billion. All of the flows mentioned have been driven by a single fund, which tracks the Communications Service Select Sector index and currently accounts for 47% of the total assets for all Telecoms Sector Funds.
Amidst the second quarter US earnings season, majority of the magnificent seven have reported with Alphabet and Tesla up first in the previous week, and a good chunk rolling in this week. All companies – Meta, Microsoft, Amazon, and Apple – showed no signs of slowing down in the race to build data centers to support generative AI efforts. Artificial Intelligence Funds posted their 12th consecutive inflow, and 37th of the past 39 weeks. Year-to-date flows have surpassed $10 billion total, which is close to the combined total from the past two yearly inflows.
An interesting story underlies Utilities Sector Funds’ biggest inflow in four months. Themes among the top 10 funds with the biggest inflows included water, electric utilities, and a leveraged 2x fund tracking the performance of NuScale Power Corp (SMR). NuScale designs small modular nuclear reactors (SMRs), tying into the broader clean energy push and the surging demand for electricity to power AI. Late last year, several big tech players backed the construction of SMR projects to secure the energy needed for expanding data centers.
Bond and other Fixed Income Funds
Investors steered another $26 billion into EPFR-tracked Bond Funds during the first week of August as a fresh waves of uncertainty, triggered by tariffs and US jobs data, rippled through global asset markets. Emerging Markets, Global and Asia Pacific Bond Funds extended their current inflow streaks, US Bond Funds tallied their biggest inflow since EPFR started tracking them weekly in 2003 and Europe Bond Funds took in fresh money for the 16th straight week.
At the asset class level, Ultra Short Term Bond Funds recorded their largest inflow since the second week of May, Collateralized Loan Obligation (CLO) Bond Funds added to a run of inflows that started in mid-April, High Yield Bond Funds took in fresh money for the 15th consecutive week and Inflation Protected Bond Funds posted their 25th inflow year-to-date.
Flows to US Bond Funds favored Short Term Sovereign, Intermediate Term Mixed and Total Return Bond Funds while Long Term Sovereign Funds experienced the heaviest outflows. Municipal Bond Funds remain on track to match last year’s total as heavy issuance has blunted investor sentiment and yields on top-rated 10-year notes have fallen below those offered by treasuries of comparable duration.
Europe Bond Funds saw the biggest flows go to funds with diversified geographic, corporate and short-term mandates while Sovereign Europe Bond Funds posted their biggest outflow in over eight months. Retail support remains solid, with retail share classes taking in fresh money for the 13th straight week.
Funds dedicated to Australia underpinned the headline number for all Asia Pacific Bond Funds as that group extended its longest inflow streak since 2Q15.
Country fund groups dedicated to Asian markets again drove overall flows into Emerging Markets Bond Funds, with Thailand, China and Korea Bond Funds taking in over $1.2 billion between them.
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