Investors finally seem to be turning bullish on the outlook for equity markets again. According to Bank of America, Merrill Lynch’s asset flows data, the last two weeks have seen the highest levels of inflows into equity funds this year.
Between 8 August and 18, August Bank of America registered $11.6 billion of equity fund inflows signalling a renewed risk-on attitude among investors.
However, investors continue to prefer passive over active investments. The “passion for passive” as Bank of America calls it shows no sign of slowing down.
While equity inflows totalled $5.1 billion in the week to August 18, equity ETFs saw inflows of $8.4 billion but investors withdrew a $3.3 billion from long-only mutual funds. Year-to-date investors have withdrawn a staggering $180.2 billion from long-only mutual funds, approximately 3.4% of the total assets under management in the sector.
At the same time, equity ETFs have seen inflows of $52.5 billion year-to-date, which is equivalent to 2.4% of assets under management. Overall, for the year to August 17 net flows for equity ETFs and long only mutual funds total $-127.7 billion, 1.7% of assets under management according to Bank of America’s numbers.
Risk-on or hunt for yield?
Aside from equity passive/active flow trends, the flows that have caught the most attention this year have been those into commodities and emerging market funds.
This week saw the seventh consecutive week of inflows into emerging market equity funds. Flows through the week totalled $5.1 billion, bringing the total of the last seven weeks to $14.6 billion, the most impressive run since September 2014. European equity funds saw yet another week of outflows. Europe equity flows last this week came in at $-2.8 billion the 28th straight week of outflows, the longest outflow streak in history according to Bank of America’s figures.
Commodity funds saw flows of $-0.3 billion this week, which is roughly 0.3% of assets under management. Year-to-date investors have added $32.9 billion to commodities funds, increasing the sector’s assets under management by 26.3%.
On the fixed income front, investors continued to plough money into fixed income funds this week. Emerging market debt funds saw inflows of $2 billion, taking the inflow total over the past seven weeks to $20.2 billion, the largest figure on record. Investment-grade flows amounted to $3.8 billion, high yield Bond fund flows amounted to $1.9 billion and investors deposited $0.9 billion with Muni funds. Money market funds were the biggest fixed income losers reporting outflows of $34.5 billion. Bank of America’s analysts believe these outflows may be a result of the upcoming money market fund regulations.