Another $23.3bn pulled from bond funds as investors stampede to exits

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A new global record for bond fund outflows was set last week after investors reacted to the Federal Reserve’s road map for the eventual end of quantitative easing.

Flow flow data provider EPFR Global reports that a net $23.3bn (£15.3bn) was pulled from the bond funds it tracks in the week ending 26 June 2013 after Fed chairman Ben Bernanke said the bank’s $85bn-a-month QE programme could slow later this year if the US economy continues to recover as expected.

Last week’s outflows “smashed” the previous record for bond funds, the group notes, set just two weeks before when a collective $14.45bn was withdrawn from the portfolios at the start of concerns over the future path of the Fed’s bond-buying efforts.

Some $13.1bn was redeemed from equity funds over the week with dividend-focused products being hit with their largest weekly outflows in more than two years. The redemptions from both equity and bond funds were split roughly 50-50 between retail and institutional investors.

Investors also withdrew a net $10bn from emerging market equity and emerging market debt funds while $2bn flowed out of commodity funds. However, Korea equity funds witnessed inflows as the country is stands to benefit from improved exports if the US strengthens enough for QE to be tapered.

In all, new weekly redemption records were seen among US, global, emerging markets, municipal, high yield and total return bond funds tracked by the group across the globe.

EPFR Global says: “Any reservations US Federal Reserve chairman Ben Bernanke might have had about his credibility were dispelled during the fourth week of June.

“Investors and financial markets responded to his reaffirmation of the US central bank’s desire to start winding down its current quantitative easing programme, and possibly end it next year, by stampeding towards the exits.”