Investors cut their exposure to Europe and emerging Asian markets during the second quarter of 2012. But where did they put their money?
Select groups of bond funds, sector funds and Japan-focused investments picked up much of the global inflows, according to EPFR Global, a Boston-based research firm.
During the quarter, U.S. and global bond funds were the only major geographical fund groups to absorb over $10 billion, EPFR Global says in data it released for the quarter.
U.S. money-market funds, for instance, had outflows of $28.5 billion during the March-June period vs. U.S. bond funds, which attracted $57.1 billion.
"It’s possible that in an environment where yields on some short-term U.S. and German debt are negative that investors are opting to hold more physical cash," said EPFR Global research director Cameron Brandt, in a statement.
For the first half of 2012, flows into U.S. bond funds were $129.7 billion – way ahead of the $35.4 billion that went into this category in the first half of 2011.
Overall, global funds into bonds worldwide were $75.4 billion in Q2 and $197.3 billion in the first half of ’12, a big jump from $98.5 billion for the first half of ’11.
Equity Fund Flows
Equity funds are seeing some support from institutional investors and spotty inflows from retail investors, the group says. Retail investors were net contributors to this fund category in only two of the past 61 weeks. In contrast, bond funds experienced retail contributions in 25 of the last 26 weeks.
As funds left Europe and much of Asia, Japan equity funds “swam against this tide, despite concerns about energy supplies, a less competitive currency and weaker Chinese demand,” according to EPFR Global.
The $5.6 billion absorbed by Japan funds was the highest level since late 2005 and is being attributed to the Bank of Japan’s asset-buying program, the research firm notes.
Sector Fund Flows
“Gold began to glitter again for investors during the second quarter,” notes EPFR. Flows into gold and precious-metal funds were $1.6 billion in Q2 and total $5.1 billion in the first half of ’12.
Yield-hungry investors also liked real estate funds, which had inflows of $2.5 billion in the quarter and $6.8 billion for the first half of 2012 – topping the results of gold-precious metals.
Commodities experienced about $264 million of inflows, but have had more than $7 billion in such flows year to date.
Health care/biotech funds grew by $1.3 billion in the second quarter and had inflows of $1.8 billion for the first six months of the year.
Other equity groups experiencing inflows of late are global emerging market funds, with positive flows of $1.4 billion in Q2, and global equity funds, up $755 million in the past three months.