Decelerating fund flows have been linked to central bank policy – particularly the European Central Bank’s inaction over further stimulus in September.
According to the Institute of International Finance (IIF), global mutual funds and exchange-traded funds have seen inflows of $12.5 billion (€11.2 billion) since mid August – a sharp drop from the $37 billion of inflows recorded over the previous four weeks.
The reduced activity followed the ECB’s and also came ahead of key Bank of Japan and Federal Reserve policy meetings this week.
The IIF also found there was softer demand for developed market market bonds, which saw inflows of $13 billion in the last month – half of the $26 billion of inflows seen between mid-July and mid-August.
Central bank policy concerns has also impacted flows into emerging markets, which attracted $5.5 billion of new money since mid-August compared to $16.5 billion of new money between the middle of July and August.
However, despite some volatility, fund investors have continued to be net buyers of emerging market bonds ($2.8 billion) and equities ($2.7 billion), with overall flows to emerging market bonds and equities outpacing their mature market counterparts as a percentage of assets under management.
European investor demand for emerging market bonds has been strong according to the institute, with $4.2 billion of inflows, which offset selling of the asset class by other investors.
During the past month, European investors and US investors increased their exposure to emerging market equities by more than $2.9 billion and $1.4 billion, respectively.
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