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Equity and High Yield Funds Outflows 2012

Fund flow data are closely watched by many investors as an indicator of sentiment, although they do not always indicate a market has peaked. The last time equity funds suffered three weeks of withdrawals was in early October last year, when the market was at its lowest level in a year and about to begin a 20 per cent rally to post-financial crisis highs.

After  a five-day losing streak for US equities, with the S&P fell by 4.3%, investors have pulled out more than $7 bn from US exchange-traded and mutual funds that invest in equities.  It is the largest outflow since mid-December.  The withdrawal is equivalent to about 1% of the assets invested in such funds.

Exchange traded and mutual funds that buy into junk bonds or high-yield debt issued by non-investment grade companies also suffered net outflows of nearly $1.3bn in the week to Wednesday, the first net redemption since mid-November.

EPFR Global, a provider of asset-allocation and cash-flow data, shows 18 straight weeks of cash inflows to the asset class domestically, for a total of $19 billion. The $16 billion inflow for the year to date is the largest on record (dating to 2007) and includes $6.5 billion of inflows (or 41%) to exchange-traded funds.

Reference:

    1. Financial Times, 2012-04-13, “US Equity funds see biggest outflows of 2012”
    2. Forbes, 2012-04-10, “High-Yield Bonds Pull Back ahead of earnings season despite huge ETF inflow”