>>> Asset Class Flows
- Equities: $4.6bn inflows (inflows in 4 out of past 5 weeks) (note $6.3bn ETF inflows vs $1.8bn mutual fund outflows)
- Bonds: $3.8bn outflows (largest 3-week outflows since Jul’13)
- Precious Metals: $0.3bn inflows (largest inflows in 8 weeks)
>>> Equity Flows
- Japan: $3.0bn inflows (inflows in 17 out of past 18 weeks)
- EM: $1.7bn inflows (note divergence between $3.1bn ETF inflows and $1.4bn mutual fund outflows)
- Europe: $3.4bn inflows (largest inflows in 11 weeks)
- US: $4.6bn outflows (first outflows in 4 weeks)
>>> Fixed Income Flows
- 9 straight weeks of outflows ($1.4bn) from govt bond funds (longest outflow streak since Jan’13)
- 5 straight weeks of outflows from EM debt funds (albeit modest $0.3bn)
- 2 straight weeks of IG bond outflows ($1.9bn)
- Tiny HY bond outflows ($67mn) (3rd straight week)
- Chunky outflows from bank loans ($0.4bn)
- First inflows to TIPS in 5 weeks ($0.2bn)
Analysis :
Talking Points
* Rotation to Stocks: 2nd consecutive week of equity inflows ($4.6bn) & bond
redemptions ($3.8bn)
* Bond exit: biggest 3-week outflows ($20bn) from all bond funds since Jul’13 (Chart
1); 2nd consecutive week of IG redemptions ($1.9bn), follows 77 weeks of
uninterrupted inflow; longest streak of government bond outflows since Jan’13; 5th
straight week of EM debt outflows
* Rotation from US to EAFE: inflows to Europe & Japan, outflows from US equities,
extending YTD trend: $109bn US equity outflows versus $95bn of EU & Japan
inflows
* From Feast to Famine: end of Excess Liquidity = end of Excess Returns = end of
Excess Positioning in "Yield" theme; end of ZIRP means assets with massive
inflows/returns at risk from "vicious cycle" of redemption/losses; in our view most
vulnerable = MLPs, IG, REITs, Dividend Yield funds, HY (in that order – Chart 2);
less vulnerable to investor exodus are EM debt (price unwind past 2 years), gold
and TIPS (price unwind, lower inflows).