Join EPFR’s Research Associate, Kirsten Longbottom, for the weekly Fund Flow highlights focusing on Sector Funds as May 2023 comes to a close.
From EPFR’s Fund Flow and Allocations data, here are some of the key trends we’re seeing:
Technology sector funds remains the most popular for investors
Anime, Comic and Gaming Funds continue to take on money
Telecoms Sector Funds continue extend their inflow streak
Utility Sector Funds reach 11 week high
The final week of May ended with US lawmakers voting to lift the country’s debt ceiling, markets assigning a one-in-three chance that the Federal Reserve will raise interest rates in mid-June and the price of oil testing 18-month lows. Against this backdrop, flows into all EPFR-tracked Equity Funds hit a 17-week high on the back of record-setting inflows to Technology Sector Funds and China Equity Funds absorbed nearly $5 billion.
Amidst increasingly stark warnings of economic chaos if the current standoff over the US federal debt ceiling is not resolved, EPFR-tracked US Bond Funds pulled in another $8.1 billion going into the final week of May as they recorded their 21st consecutive inflow.
Our EPFR Fund Flows and Allocations data reveals money is flowing out of “Risk Assets” and into Money Market Funds and Gold Funds.
Join Steve Muzzlewhite, Global Head of Customer Solutions, for our weekly markets update. As we head towards the end of May 2023, our data shows the following:
“Risk Assets” out of favor
Latin American Equity markets win
US Bond Investors shrug off “US Debt Ceiling Crisis”
Worries about the impact a two-pronged credit squeeze, driven by quantitative tightening and the pressure on regional bank loan books, will have on the US economy kept investors in a defensive frame of mind during the week ending May 17.
In this blog, EPFR’s Kirsten Longbottom and Steven Xinlei Shen expand on a recent WSJ article, Muni Junk Bond King John Miller to Retire.
Turmoil in the US banking industry has persisted into the second quarter, with interest rate hikes, skittish depositors and the scramble for tighter regulation heaping more pressure on major banks. These constraints, as the New York Times suggests, could cause businesses to look elsewhere for loans. Hence, there is a chance that borrowers turn to non-traditional banking or “shadow banking” options that are less constrained by existing regulations. But where does this present an opportunity for investors? In Money Market Funds that invest primarily in short-term, low-risk debt.
Year-to-date the American S&P 500 index has rallied by over 7.5%. However, with a large proportion of these gains driven by just seven technology names, just how sustainable this trend has become is a hot topic among investors. This effect has been exacerbated in recent weeks as the 1Q23 earnings season results proved more fruitful for tech companies relative to other US sectors.
Following interest rate increases from both the US Federal Reserve and the European Central Bank, disparity has taken over investors. Our Head of Global Customer Solutions, Steve Muzzlewhite, uses our fund flows and asset allocations data to analyze the latest sector rotation and portfolio management strategies, and how these are impacting global markets.
A recession in the second half of the year, triggered by the impact of current interest rates on the real estate sector and the banks that lend to it, is a fearful scenario for investors. This was reflected in the flows for EPFR-tracked Sector Funds during the week ending May 10, with a combined $3.8 billion redeemed from Financial, Real Estate, Energy and Commodities Sector Funds.
