Some optimism eludes the blockade in mid-April

The market euphoria that followed the announcement of a ceasefire between the US and Iran on April 7 soon ran into the painful reality that both sides remain far apart. But, despite the US blockade of the Straits of Hormuz, its momentum lifted benchmark US equity indexes to fresh record high and continued to drive a “risk on” rotation in the flows to and from EPFR-tracked fund groups.

Going into the second half of April, investors pulled over $8 billion from Europe and Japan Equity Funds while US Equity Funds posted their third straight inflow and fifth since the fighting began. Emerging Markets Bond Funds snapped their five-week redemption streak, High Yield Bond Funds chalked up their biggest weekly inflow since mid-2Q25, and Private Credit Funds recorded another modest inflow.

Investor appetite for income-producing assets remains strong. Dividend Equity Funds ended the week with their 91st inflow over the past 24 months and all Bond Funds extended an inflow streak stretching back to the fourth week of 2Q25.

Overall, the week ending April 15 saw a net $7.8 billion flow into all EPFR-tracked Bond Funds and $11.3 billion into Equity Funds. Investors also steered $1.8 billion into Balanced Funds and $3.2 billion into Alternative Funds while outflows from Money Market Funds exceeded $170 billion. In the case of the liquidity funds, the key driver was the deadline for quarterly and 2025 US income tax payments.

At the asset class and single country fund levels, flows into Bear Funds and redemptions from Leveraged Equity Funds hit their highest levels since late 2Q25 and mid-2Q25, respectively, Inflation Protected Bond Funds absorbed fresh money for the 11th straight week, and Space and Satellite Funds recorded their biggest inflow since early March. Russia Bond Funds set a new inflow record for the third week running, flows into Turkey Money Market Funds climbed to a fresh record high and Netherlands Bond Funds experienced record-setting redemptions.

Emerging Markets Equity Funds

The second week of April saw all Emerging Markets Equity Funds post their biggest collective outflow as Asia ex-Japan Equity Funds saw over $14 billion redeemed. Those redemptions offset fair-to-strong inflows for EMEA, Frontier, the diversified Global Emerging Markets (GEM) and Latin America Equity Funds, with the latter setting a new weekly record.

It was a tough week for Leveraged EM Equity Funds, which posted their biggest outflow since EPFR started tracking them, and EM Dividend Funds saw a five-week run of inflows end. But funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates tallied their 11th inflow over the past three months and flows into EM Collective Investment Trusts (CITs) hit a 12-week high.

An inflow of over $1 billion to Brazil Equity Funds underpinned the headline number for all Latin America Equity Funds. Investors gravitated to fund groups offering exposure to markets with energy stories, with Argentina Equity Funds posting their third highest inflow of the year-to-date, flows into Colombia Equity Funds hitting a level last seen in mid-2Q23, and Mexico Equity Funds attracting over $100 million for the first time since mid-February.

There was less interest in Chile’s copper story. In a recent note, CEIC economists noted that, “Export figures from Chile, the world’s no. 1 copper producer… suggests that a historic boom might be levelling off.” Driven by record prices, Chilean copper shipments hit their highest level since 2021 in January, but “Chile’s copper export growth rate has steadily retreated as the conflict persisted through March.”

Among the Asia ex-Japan Country Fund groups, those with artificial intelligence stories saw investors pull back with Mainland China, Korea and Taiwan (Province of China) Equity Funds all experiencing redemptions. In the case of Mainland China Equity Funds, five of the 10 individual funds posting the biggest outflows were also on the same list for the week ending January 28 when the group experienced record redemptions.

Lingering optimism about the chances of a negotiated settlement between the US and Iran saw Israel Equity Funds post their biggest outflow since late September while Turkey Equity Funds recorded their first inflow since mid-February and biggest since late January.

Developed Markets Equity Funds

That the US and Iran have been talking – if not agreeing – about the outlines of an end to their latest conflict was enough for investors during the second week of April. The US blockade of the Straits of Hormuz notwithstanding, they pumped another $17 billion into US Equity Funds while continuing to distance themselves from Europe and Japan-mandated funds. That enabled all EPFR-tracked Developed Markets Equity Funds to post their 12th inflow of the year so far.

The renewed appetite for US exposure was also reflected in the latest flows to Global Equity Funds, the largest of the diversified groups. Funds with fully global mandates again took in $3 for every $1 committed to Global ex-US Equity Funds.

Both domestically and foreign domiciled US Equity Funds enjoyed solid inflows during the latest week, with the bulk of the fresh money finding its way into Large Cap Mixed Funds. Despite the positive inflows, recent data suggests that investor and manager conviction is fragile. US Bear Funds posted their biggest collective inflow in over 28 months and selling by corporate insiders has accelerated.

In a recent report, Senior Liquidity Analyst Winston Chua noted that, “Since the onset of the Iran war (Feb 28), insider activity has tilted decisively toward selling, with the sell-to-buy ratio rising to 9.4-to-1 from 6-to-1 between January 1 and February 27. While not an outright bearish signal, the elevated ratio points to increased caution and active risk management.  Selling has been concentrated in sectors that have either outperformed or stand to benefit from geopolitical tensions, [which does suggest] profit taking.”

Europe Equity Funds saw over $4 billion flow out, with only four of the major country-mandated groups – Sweden, Finland, Portugal and Greece Equity Funds – posting modest inflows. Elsewhere, mixed corporate earnings and high energy prices sapped investor appetite. Redemptions from France and Netherlands Equity Funds hit their highest level since late 4Q24 and mid-4Q22, respectively. In the case of the Netherlands, lawmakers are expected to pass a revised capital gains tax regime that includes unrealized gains.

Investors also pulled over $4 billion out of Japan Equity Funds, with retail share classes experiencing their heaviest redemptions in over nine months, as the country’s benchmark Nikkei-225 index climbed to fresh record highs on the back of hopes for a resolution of the US-Iran conflict. Foreign domiciled funds recorded their ninth inflow over the past 11 weeks.

Global Sector, Industry and Precious Metals Funds

Big banks set the stage for the 1Q26 corporate earnings season during the second week of April, with some smaller regional banks, REITs and energy names like Chevron releasing their results after the latest reporting period ended on April 15. The focus will turn to tech later in the month, with hopes of some tailwinds from AI implementation and data center infrastructure, and close out with Nvidia May 20.

As the latest earnings season starts to ramp up, redemptions from all cyclical Sector Fund group climbed to a 47-week high with Technology and Financials Sector Funds bearing the brunt of those outflows. Flows into their defensive counterparts, meanwhile, climbed to a four-week high as Infrastructure, Industrials, and Telecom Sector Funds enjoyed solid inflows and Utilities Sector Funds extended their inflow streak – now totaling $3.8 billion – to nine weeks.

Financials Sector Funds racked up their ninth outflow of the past 10 weeks, a stretch that has seen a net $12.5 billion redeemed. The top 10 funds with the biggest outflows this week spanned regional banks, a Japan fund tracking TOPIX Banks index, Canadian banks, financials ex-banks, and brokerage or brokers-dealers. All Bank Funds and a subset of Regional Banks both suffered a fourth consecutive week of outflow.

Flows into Infrastructure Sector Funds were the second largest on record this week, marking their third inflow of the year above $1 billion. Year-to-date, cumulative inflows are notching closer to the $9 billion mark (15 weeks), representing almost half of the total absorbed since the group started seeing these relentless inflows nearly 12 months ago. Smart & Power Grid Funds snapped their longest outflow streak (just two weeks) of the past year. Data Centers & AI Infrastructure Funds, which more so sit in the tech group, are also seeing positive investor sentiment.

Technology Sector Funds posted their third outflow of the past six weeks, and their biggest in 47 weeks, as funds offerings leveraged exposure pulled the headline number down. Semiconductor ETFs pulled in opposite directions, with two funds pulling in over $3.8 billion and $4.4 billion redeemed from another two.

Outflows for both Commodities/Materials Sector Funds and Healthcare/Biotechnology Sector Funds were muted in the latest week. In the case of the latter, global and Europe regional-mandated funds pulled the headline number down while a mainland China dedicated ETF tracking the drug industry and US dedicated ETF helped to even it out, both pulling in over $200 million.

Bond and other Fixed Income Funds

EPFR-tracked Bond Funds absorbed fresh money for the 50th consecutive week as returning risk appetite saw flows into Corporate Bond Funds hit a 16-week high while those with sovereign mandates posted outflows for the first time in 10 weeks. All four major EM regional groups – Asia ex-Japan, EMEA, Latin America, and GEM Bond Funds – posted inflows, marking the first broad-based commitment in roughly two months. On the DM side, Europe Bond Funds pulled in over $4 billion.

With the US and Iran talking, investors keyed into the riskier asset classes while exiting their shorter-term bets. At the asset class level, flows into High Yield Bond Funds held strongfor a second consecutive week, reaching their highest level since mid-May of last year, and Bank Loans Funds recorded their third straight inflow. The latter’s subset of CLOs enjoyed a sixth consecutive weekly inflow. Meanwhile, municipal bond investors pressed the brakes as the group posted their biggest outflow in exactly a year.

Corporate Bond Funds of all duration mandates posted inflows, with Intermediate-Term Corporate Funds snapping a five-week outflow streak, flows into Long-Term Corporate Funds hitting a 23-week high, and short duration funds attracting their third inflow of the past four weeks. On the sovereign debt side, only Short-Term Sovereign Bond Funds saw outflows, while those with intermediate and longer-term durations posted a second and third straight week of inflows.

Ultrashort Bond Funds posted their biggest outflows since mid-4Q23, snapping a run of inflows that lasted 23 weeks. In the five weeks after the US and Israel strike on Iran Feb. 28, these funds saw inflows reach $3.4 billion (1.7%) of assets but demand has stalled as investors wait for higher yields to become available.

Often competing for the same “cash-like” allocation in portfolios to ultrashorts, investor sentiment towards Money Market Funds showed a similar narrative. The latest week showed record-setting outflows hit above the $170 billion mark, surpassing a previous record from this same week two years ago (17 Apr 2024). Investors exited the “waiting room” of money market funds as confidence resumed and tax deadlines loomed. For every $1 redeemed by retail investors, another $23 was redeemed by institutional investors. Private Credit Funds posted a third consecutive inflow, setting them up for a rebound from outflows in March.

Flows for Emerging Markets Bond Funds returned to positive territory, with the group snapping their longest redemption streak since December 2025. It was also just their sixth inflow in the 15 weeks year-to-date. At the country level, mainland China dedicated Bond Funds accounted for nearly half the headline EM total with their inflows reaching above $1.5 billion for only the second time this year. Within the EMEA universe, South Africa, Turkey, and Russia Bond Funds each took in between $125 to $200 million. However, these represented under 1%, 3.2% and 10% of the country fund group’s AuM, respectively, making the relative impact most pronounced for Russia.

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