Despite Concerns, Investors Take A Risk-On Approach To Fund Investing

By | October 27, 2015

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By Tom Roseen Banking on the recent three-week rally in equities, supported by better-than-expected first-time jobless benefit claims, a jump in home builder confidence in October, hopes that Beijing would continue to provide more stimuli to the Chinese economy, and housing starts being near eight-year highs, investors took a risk-on approach to fund investing during the fund-flows week ended October 21, 2015, injecting a net $6.3 billion into conventional funds and exchange-traded funds (ETFs). Investors turned their back on money market funds, redeeming $2.6 billion for the week, but they were net purchasers of the other three fund macro-groups, injecting some $4.4 billion into taxable bond funds, $4.3 billion into equity funds, and $0.2 billion into municipal bond funds for the week. For the third consecutive week taxable bond funds (including conventional funds and ETFs) witnessed net inflows of a little less than $4.4 billion, their largest weekly inflows since the week ended May 20, 2015. As fund investors became more risk seeking, they padded the coffers of corporate high-yield debt funds, which attracted the largest amount of net new money for the week of the major fixed income groups, taking in $3.3 billion (their second largest weekly net inflows on record and the largest since October 26, 2011). (click to enlarge) Source: Thomson Reuters Interestingly, the risk-on mentality was not equally applied to the equity side of the business. While authorized participants (APs) injected $4.5 billion into equity ETFs for the week, conventional fund investors were net redeemers of equity funds, withdrawing $0.2 billion from the group. Despite continued concerns about the Q3 earnings season and in anticipation that the Federal Reserve may delay raising interest rates until 2016, APs were net purchasers of domestic equity ETFs (+$3.2 billion), injecting money into the group for a second consecutive week. They also padded the coffers of nondomestic equity ETFs (to the tune of +$1.3 billion) for the sixth week running. In contrast, on the conventional funds side of the business, domestic equity funds-handing back $0.8 billion-witnessed their fourth consecutive week of net outflows. Meanwhile, their nondomestic equity fund counterparts witnessed $646 million of net inflows-attracting money for the first week in four. Scalper1 News

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