Investors return to equity funds as QE fears ease

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Investors poured money into equity funds across the globe last week as fears eased that the Federal Reserve was on the brink of tapering its quantitative easing programme.

Fund flow data provider EPFR Global reports that the equity funds it tracks benefitted from $13.6bn (£9bn) in net inflows during the week ending 10 July – with retail commitments reaching a 21-week high.

US and European equity funds witnessed the biggest weekly inflows since 2011’s third quarter and 2012’s second quarter respectively while Japanese equity funds extended the inflow streak that started in mid-January as optimism grew on the earnings of companies in these regions.

EPFR Global says: “With the US unemployment rate remaining 60 basis points north of the level perceived as a ‘go’ signal for the US Federal Reserve to start scaling back its quantitative easing, investors turned some of their attention to the second quarter earnings season in early July.”

However, Asia ex-Japan equity funds racked up another week of net outflows – their 13th in the past 14 weeks – after weak export data added to mounting fears that China is heading towards a so-called hard landing.

Emerging markets in general suffered last year with combined redemptions from equity and bond funds passing $3bn last week. This is the fifth time in six weeks this level of net outflows have been seen.

Bond funds recorded outflows of $2.69bn in the week ending 10 July, although this is far below the record weekly redemptions that were seen in the previous month.