Follow The Fund flows in 2016: QE in the driving seat

fund flows in 2016fund flows in 2016

BoAML | QE drove fund flows in 2016, but the past two months was all about reversing this trend. All-in-all, commodities, EM debt and IG were the winners; equities and HY the losers. For example, last week’s flows HG: +$1.6bn / HY: +$1.1bn / Equities: -$40mn

2016 Flows = all about QE

QE drove fund flows in 2016, but the past two months has been all about reversing this trend. Even though high-grade and EM debt funds have been the main beneficiaries of QE-mania, recent developments have shifted momentum to the negative side. Equities have been the biggest loser in 2016, with outflows mounting to $100bn, as investors flocked to QE-eligible assets. HY funds closed the year on negative territory in terms of flows, despite the recent rebound. Commodities were the biggest winner for most of 2016, but rising rates reversed the strong inflow seen over the first part of the year.

Over the past week

High grade funds had their first week of inflows after seven weeks of outflows. Note that the inflows were spread across a wide range of funds. High yield funds continued to see inflows for a fourth week, at a strong $1bn+ rate.  The inflows last week came across the board. Global, US and European-focused funds in Europe recorded strong inflows.

Government bond funds flows flipped back to positive territory after two weeks of relatively heavy outflows. Money market funds weekly flow data point to a third week of outflows, albeit marginal. Overall, fixed income funds flows flipped back to positive after seven weeks of outflows. European equity funds recorded a marginal outflow last week.

Global EM debt fund flows remained negative for the eighth week in a row, amid a non-stop outflow trend since the US elections. Commodities funds just managed to record a small inflow to stop the outflow trend seen over the past six weeks.

On the duration front, short-term IG funds inflows accelerated in the past week; the strongest weekly inflow in more than two years (August 2014). Similarly, mid-term funds recorded an inflow, reversing a negative trend that lasted for seven weeks. Long-term funds continued to record outflows over the past week of the year, albeit marginal.