Investors return to funds on US and European hopes

Guide to Bridging Finance 2008

Investors globally channelled money into investment funds last week on the back of increased confidence on the macroeconomic stage, research suggests.

Figures from fund flow analyst EPFR Global shows retail inflows to US equity funds in the week ending 24 July reached their highest since the third quarter of 2009. The funds took £4.13bn over the week, with almost half coming from retail investors and funds with active mandates seeing their highest flows in over a decade.

“Funds with mid-cap mandates attracted the most money during a week when funds with a value style handily outperformed their growth counterparts across all capitalisations,” the researcher says.

In addition, US high-yield bond funds witnessed their second largest weekly inflows on record as investors grew more confident that the strength of the US economy would be able to offset the impact of higher interest rates.

Data from the US has been brighter for some time, with its housing market being a particular source of strength. Last week, the International Monetary Fund said the underlying condition of the US economy is improving and predicted that growth should gradually accelerate over the next year.

EPFR Global also reports that combined inflows to its two major European regional equity fund groups were the biggest it has seen since the end of December. Investors have started to become more optimistic about the health of the European economy, following an uptick in closely watched business surveys and improvements in German confidence at the start of the third quarter.

“Flows into EPFR Global-tracked funds during the week ending July 24 highlighted investor faith in the US recovery and their growing conviction that this Europe’s battered economy is finally on the mend,” the report says.

Overall, bond funds tracked by the analyst took in a nine-week high of $4.36bn while equity funds absorbed $8bn. Money market funds saw $12bn nin redemptions.