The week ending Dec. 10 was not, for most US-mandated fund groups, one to write home about. Heading into the US Federal Reserve’s final policy meeting of the year, net flows into all US Equity and Bond Funds totaled $5.8 billion, well short of their nearly $25 billion average since mid-September, and US Money Market Funds posted their fourth outflow of the current quarter.
With the outcome of the FOMC’s final policy meeting of 2025 the subject of considerable debate, investors took a wait-and-see attitude across the board with Brazil Equity Funds, Canada Equity and Bond Funds, the diversified Global Emerging Markets (GEM) Equity Funds and Municipal Bond Funds among the handful of groups to post above average inflows for the week.
Overall, a week that ended with the Fed somewhat grudgingly cutting its key rate by another 0.25% saw all EPFR-tracked Equity Funds absorb a net $5.8 billion and Bond Funds $8.7 billion. Investors also steered $4 billion into Alternative Funds while Balanced and Money Market Funds were hit with redemptions totaling $1 billion and $8.4 billion, respectively.
Behind the headline numbers, exchange traded funds (ETFs) continue to pull in record-setting sums. Equity ETFs now hold 36% of all Equity Fund assets, up from 33% only 12 months ago, and EPFR has recorded nearly 40 mutual fund conversions to ETFs since the start of the third quarter.
At the asset class and single country fund levels, Aerospace & Defense Funds extended their longest redemption streak since early 1Q24, Physical Silver Funds posted their sixth straight inflow and Inflation Protected Bond Funds chalked up their fourth biggest outflow of the year. Flows into Canada Bond and Greece Equity Funds climbed to quarter-to-date and 17-week highs, respectively, and Russia Bond Funds pulled in fresh money for the 34th time over the past nine months.
Emerging Markets Equity Funds
For the second week running, flows into the diversified Global Emerging Markets (GEM) Equity Funds underpinned the headline number for all EPFR-tracked Emerging Markets Equity Funds, which posted their seventh straight inflow and their 16th since the second week of August. Latin America Equity Funds also enjoyed solid inflows while Asia ex-Japan, EMEA and Brazil, Russia, India and China (BRIC) Equity Funds recorded outflows ranging from $16 million to $266 million.
The week ending Dec. 10 saw EM Dividend Funds post their fifth straight inflow while funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates and Leveraged EM Equity Funds both chalked up their fifth outflow of the current quarter. When analyzed by fund domicile, collective flows into funds based in Europe hit their highest level since mid-1Q23.
With key policy meetings on the immediate horizon, China Equity Funds struggled to attract fresh money as investors waited for clues about the measures that China’s government will take to support the country’s economy and meet growth targets in 2026. But appetite for funds dedicated to Chinese state-owned enterprises remains strong. Korea and India Equity Funds also posted outflows for the week. In the case of Korea-mandated funds, currency weakness – the won has fallen some 5% against the US dollar during the current quarter – is giving investors reason to question the trajectory of inflation and interest rates during the first half of 2026.
Among fund groups dedicated to smaller Asian markets, Thailand Equity Funds racked up their 90th outflow since the beginning of last year. Political volatility, shifting trade dynamics, a tourism sector struggling to regain pre-Covid heights and border clashes with Cambodia have sapped both domestic consumer and foreign investor confidence.
Confidence in EMEA markets was also in short supply, with South Africa Equity Funds seeing a nine-week run of inflows coming to an end and Turkey Equity Funds posting their 18th outflow since mid-July.
The headline number for Latin America Equity Funds again hinged on flows into Brazil Equity Funds offsetting redemptions from Mexico-mandated funds. Flows into the former were the second largest during the past 24 months despite the country’s central bank’s reluctance to cut interest rates while Mexico Equity Funds tallied their eighth outflow during the past nine weeks.
Developed Markets Equity Funds
EPFR-tracked Developed Markets Equity Funds matched last year’s number of weekly inflows – 42 – with three weeks of the current year to go as the US Federal Reserve delivered its third interest rate cut since September. US, Canada and Global Equity Funds attracted modest amounts of fresh money during the first full week of December, offsetting redemptions from Japan, Pacific Regional and Europe Equity Funds.
While short-term US interest rates are falling, investors fear that Japan’s will keep rising as markets digest the new debt needed to fund the new government’s $130 billion stimulus plan. Flows to Japan Equity Funds continued to taper off from their recent highs in early October, with overseas domiciled funds posting the biggest collective outflow in over four months, as investors look ahead to the Bank of Japan’s next policy meeting on Dec. 18th and 19th.
The European Central Bank last cut rates in June, and some forecasts suggest it could remain on hold through next year or even tighten modestly. With the Ukraine peace process spluttering and the effects of post-Covid recovery spending beginning to wane, investors are reassessing their earlier rotation into European assets. Europe Equity Funds tallied their fifth weekly outflow QTD, versus four in the third quarter and just two in in the second quarter, with UK Equity Funds being the biggest contributor to the latest overall total. Switzerland Equity Funds saw the biggest inflows among the major country fund groups, and flows into France Equity Funds hit a level last seen in early 2Q24 as the country’s fractured legislature made some progress towards passing a budget.
US Equity Funds posted a modest inflow as Small and Mid-Cap Funds both took in fresh money while Large Cap Funds recorded their first outflow since early September. Redemptions from Leveraged US Equity funds and all retail share classes hit 11-week and a one-year highs, respectively. Canada Equity Funds continued their strong run, extending an inflow streak that started in late August.
The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, posted an inflow – their 44th of the year – that went predominantly to funds with fully global rather than ex-US mandates.
Global sector, Industry and Precious Metals Funds
For the third week straight, seven of the 11 major EPFR-tracked Sector Fund groups recorded inflows with Utilities Sector Funds pulling in over $1 billion for the first time since the week ending April 2. With the Christmas holidays looming, the third quarter earnings season all-but-done and US interest rates cut by another 0.25%, investors continued to kick the tires of several key themes.
Industrials Sector Funds have experienced just a single week of outflows in the past 35 weeks with investors quite consistently putting more money into Aerospace & Defense Funds. That has shifted in recent weeks, with the subgroup posting outflows for a fourth straight week.
Of the four groups experiencing redemptions during the week ending Dec. 10 – Technology, Consumer Goods, Financial and Telecoms Sector Funds – it was Technology Sector Funds that caught the eye. After a 10-week inflow streak that exceeded $50 billion, this group posted consecutive weekly outflows for the first time since June. Driving the headline number in both weeks was a leveraged 3x semiconductor-themed ETF.
Daily flows for all Leveraged Technology Sector Funds, meanwhile, have been negative in eight of the past nine days, proceeded by nearly three straight weeks of inflows. November saw flows for this subset hit $4 billion, with the funds attracting the biggest inflows largely tracking single stocks that include Nvidia, SK Hynix, Meta Platforms, Google, Coin, Iren, Bitmine and Strategy.
Real Estate Sector Funds enjoyed their biggest inflow since early 4Q24 ahead of the third US rate cut of 2025, with flows into US Real Estate Sector Funds climbing to a 33-week high. The trend for 30-year mortgage fixed rates, while still remaining expensive relative to the QE years, has been slowly falling towards 6%, down from the 7.6% seen in October 2023.
A custom group of funds with “REIT” in their fund or benchmark name has seen their assets under management increase by $13 billion year-to-date. During the latest week, US REIT Funds saw inflows top $500 million. That was their fifth inflow of the past six weeks and their biggest inflow since mid-2Q22.
Bond and other Fixed Income Funds
With three weeks of 2025 to go, EPFR-tracked Bond Funds have pulled in some $860 billion despite persistent concerns about sovereign debt dynamics in the US, Japan, UK, France and several emerging markets. During the latest week, which ended with the US Federal Reserve’s third rate cut of the year, Asia Pacific and Asia ex-Japan Bond Funds were the only major groups by geographic focus to post an outflow, though Europe Bond Funds came close, while US, Canada, Australia and Global Bond Fund tallied inflows ranging from $261 million to $4.2 billion.
Sentiment was less bullish at the asset class level. Redemptions from both Convertible and Bank Loan Bond Funds hit their highest level since the first week of April and investors pulled over $400 million out of Inflation Protected Bond Funds. But Total Return and Municipal Bond Funds both absorbed over $1 billion, Catastrophe Bond Funds recorded their third largest inflow of the year and High Yield Bond Funds chalked up their third consecutive inflow.
Emerging Market Bond Funds posted their 34th inflow over the past 35 weeks, with flows favoring funds with local currency over their hard currency counterparts, EM Corporate Funds over EM Sovereign Funds and Intermediate Term Funds over those tied to short- and long-term debt. Retail support has faltered, with retail share classes experiencing net redemptions for the eighth week running. That’s their longest redemption streak since 2H23.
Europe Bond Funds attracted fresh retail money, but lackluster flows to the major regional groups and the more than $600 pulled out of Germany and UK Bond Funds kept the headline number just north of zero. Investors are uncertain how much scope, if any, the European Central Bank and Bank of England have to cut interest rates in 2026.
Foreign domiciled US Bond Funds continued, overall, to attract fresh money despite the latest interest rate cut. But Europe-based funds posted their first collective outflow since late September and only their second since mid-June.
Among the Asia Pacific Country Fund groups, investors rotated from Singapore and Japan-mandated funds to Australia Bond Funds which tallied their 31st consecutive inflow.
Did you find this useful? Get our EPFR Insights delivered to your inbox.
