| US equity, money market, energy and financials are benefiting and drawing in new money from investors.
Wall Street’s troubles are causing distress in stock markets worldwide, and yet, it is looking increasingly clear that many investors still consider the US as the safest place to park their money.
Bond and equity funds that invest in global and emerging markets suffered a net outflow of $9.5 billion last week, according to Massachusetts-based EPFR Global, which tracks around $10 trillion in assets in traditional and alternative funds worldwide.
In contrast, US equity funds attracted $10 billion in net inflows and US money market funds gained $11 billion.
US equity funds recorded net inflows for the eleventh time in 13 weeks “despite their relatively modest gains compared to the major emerging markets fund groups and the whip-sawing that investor sentiment received from the uneven progress towards an accord on the proposed $700 billion bailout of America’s financial sector”, says EPFR Global. The bulk of the new money flowed into US large-cap blend and US sector funds and, for the first time in five weeks, growth-oriented funds outperformed their value peers across all capitalisations.
Global financial and energy sector funds attracted more than $4 billion in net inflows, including $500 million in inflows to commodities, consumer goods and real estate sector funds.
“Given the recent market volatility, investors are currently responding to a variety of compelling forces that include finding some degree of safety, timing the bottom of various markets and sectors, hedging against the dollar weakness they expect down the road and a desire to make money out of a broadly falling market,” says Cameron Brandt, a Massachusetts-based senior analyst at EPFR Global.
“The sense that government support will stabilise the financial sector seems to be an important factor in the flows into financial sector funds,” he adds.
Meanwhile, the fresh turmoil on Wall Street “served to highlight the relatively unencumbered balance sheets of Japanese banks and the reliance of many top-tier companies on retained earnings to finance investment”, EPFR Global says.
Japan equity funds recorded net inflows for the first time since mid-July. Sentiment was also helped by the swift selection of a replacement for Yasuo Fuduka, the former prime minister. His successor, Taro Aso, is expected to outline some of his economic policy goals for the country’s sluggish economy in a speech to Japan’s parliament today.
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