With investors expecting the European Central Bank to boost its quantitative easing program and the US Federal Reserve to keep interest rates on hold when those bodies meet mid-month their risk appetite climbed another couple of notches in early March.
Flows into High Yield Bond Funds hit their highest level since EPFR Global started tracking them in 3Q03, Emerging Markets Equity Funds snapped a 17 week outflow streak, Frontier Markets Equity Funds recorded their biggest inflow since early 1Q15 and commitments to Financial Sector Funds jumped to a two month high. In addition to backing emerging and frontier markets equity, investors steered fresh money intoEmerging Markets Bond Funds for the second week running.
However. EPFR Global’s developed versus emerging markets strategy — which has outperformed an equally weighted benchmark index 10 of the past 15 years — has shifted solidly into favor of developed markets since 4Q15.
Overall, the week ending March 2 saw Bond Funds post collective inflows of $4.8 billion while Equity Funds took in $236 million and $697 million flowed out of Money Market Funds. At the asset class and country levels, Inflation Protected Bond Funds recorded their biggest inflow since mid-December, Japan Equity and Bond Funds both posted outflows and Canada Equity Funds absorbed fresh money for the fourth week in a row.
In spite of the ongoing concerns about China’s economy and increasingly dire predictions for Brazil, mutual fund investors looking at emerging markets took heart from rising oil, copper and iron ore prices in early March. They also penciled in a urther delay in the next leg of the rate hiking cycle initiated by the US Federal Reserve in late 4Q15. EPFR Global-tracked Emerging Markets Equity Funds posted inflows for the first time since early November as three of the four major groups took in fresh money.
Brazil’s woes, which include a slumping economy, rising unemployment, inflation at a 12-year high, political paralysis, the impact of the Zika virus on tourism and the loss of investment grade credit ratings, have not stopped investors from committing money to Brazil Equity Funds.
