Risk appetite reemerges as de-escalation hopes drive fresh inflows

For the second time in a row, the reporting period for EPFR-tracked funds ended with markets responding to hopes of an end to the fighting between the US and Iran and the accompanying energy shock. The upshot was a marked increase in risk appetite, which was reflected in the latest flow data. High Yield Bond Funds posted their first inflow since mid-February, flows into Private Credit Funds hit an eight-week high, and investors steered fresh money into Europe Equity, Bond and Money Market Funds.

There were still plenty of investors still playing defense, with flows into all Bear Funds climbing to a 10-week high while Leveraged Equity Fund flows swung in the other direction. Four of the six defensive Sector Fund groups attracted fresh money, versus two of the five cyclical groups.

The slight shift away from the “flight to quality” that investors showed in recent weeks has yet to move the needle in EPFR’s weekly multi-asset rankings. High yield bonds and emerging markets debt remain at the bottom of the ranking’s lowest quintile, with the latter having fallen six places over the last two weeks, while short and intermediate term treasuries remain camped in the top two slots.

Overall, the total trading volume of all EPFR-tracked assets reached a nine-week high at over $120 billion as all five major fund groups saw fresh money flow in. Accounting for nearly 60% and over 30% of that headline figure were Money Market and Equity Funds, as the former more than reversed the last two weeks of redemptions. Bond Funds extended their inflow streak to 50 weeks and over $860 billion, Balanced Funds posted their first inflow in four weeks, and flows into Alternative Funds reached a six-week high.

The influx of fresh money did help lift funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates out of their current flow slump. SRI/ESG Money Market Funds brought in their third inflow of the past four weeks, helping to snap All SRI/ESG Funds seven-week outflow streak. Meanwhile, redemptions on the final day of the reporting period overturned a five-day inflow streak SRI/ESG Equity Funds had started out the current week with, and another week of outflows for SRI/ESG Bond Funds lifted their five-week streak total to $7 billion.

Emerging Markets Equity Funds

In the first week of April, flows into Emerging Markets Equity Funds climbed to a five-week high with the four major EPFR-tracked fund groups – Asia ex-Japan, GEM, Latin America, and EMEA – all posting inflows. Talks of a ceasefire coming to reality lifted the headline number for all EMEA Equity Funds and put an end to their longest outflow streak since mid-4Q24, flows into Latin America Equity Funds hit a five-week high with sentiment towards Argentina bouncing back, and investors domiciled in both Europe and the US committed fresh money to the diversified Global Emerging Markets (GEM) Equity Fund group.

At the fund-level, redemptions were heaviest for an India Large Cap Blend Fund, while four of the top 10 EM funds with the biggest inflows this week had mandates to invest into Korea, three were GEM Equity Funds domiciled in the US, and another three – including the top ranked small cap ETF – were dedicated to Mainland Chinese stocks.

However, five of the top 10 EM funds with the biggest outflows this week were also China Equity Funds. That set the group up for their fourth redemption of the past five weeks, though it was just 0.06% of their assets compared to last week’s heftier 0.87%. Looking at flows year-to-date, China Mainland Equity and Bond funds have seen redemptions reach over 13% of their assets year-to-date. Investors have made a bigger impact on Korea (South) Balanced and Equity Funds, which have seen inflows at 92% and 32% of their assets, respectively.

Among the other emerging Asian markets, investors steered another $2.5 billion into Korea Equity Funds, flows into Taiwan (Province of China) Equity Funds were the smallest since their 11-week inflow streak started, while Greater China Equity Funds were hit with outflows for a fifth straight week.

A custom group of GEM Equity Funds with “ex-China” in their fund or benchmark name saw inflows for a 25th consecutive week. Over $1 billion flowed into those domiciled in the US, while Europe-domiciled GEM Equity Funds posted inflows for the first time in four weeks, snapping their longest run of redemptions since March 2025.

After four straight weeks that saw a net $385 million flow out, South Africa Equity Funds bounced back with their ninth inflow year-to-date. Funds investing in a concentrated portfolio of the top 20 or 50 companies from all equities listed on the JSE attracted the most attention this week. For the other EMEA Equity Fund groups, the country fund groups with the biggest discrete inflows following South Africa were Russia and Qatar Equity Funds – each with nearly $2 million – and Slovak Republic Equity Funds – with $1 million – posting their 45th inflow of the past 47 weeks. Flows as a percentage of assets were the biggest for Morocco Equity Funds as they remained above 1.2% for a second consecutive week.

Developed Markets Equity Funds

Against a backdrop of renewed market optimism, driven by hopes that fighting between the US and Iran may be drawing to a close and that energy shocks could ease, all EPFR-tracked Developed Markets Equity Funds recorded their third largest inflow year-to-date. The headline number was underpinned by strong inflows for both Global and US-dedicated Equity Funds and a five-week high inflow for Europe Equity Funds.

Meanwhile, for the first time since early 3Q25, Asia Pacific Equity Funds posted a second consecutive week of outflows. Japan Equity Funds have been the biggest contributors to this shift, with redemptions in early April hitting a 19-week high. Funds benchmarked to track the Nikkei 225 Index accounted for nearly half of this week’s total outflow.

With risk off not completely going away, Japan’s attraction as a ‘safe haven’ has lost momentum. Investors’ focus has turned back to key domestic issues revolving around the intersection of domestic consumption, wages, and inflation. After three decades of nearly flatlining, inflation has been on the rise, but not all of it has been the relatively benign, wage-driven kind. Lately, Japan has made some notable moves to ease the burden on consumers. Recent research from CEIC helps put this into perspective,

“The war in the Persian Gulf is pushing up global energy costs, but Japan’s introduction of fuel subsidies and strategic oil releases has temporarily capped pass-through, masking underlying inflation pressures rather than eliminating them. Throughout 2025, Japanese workers’ real wages fell every single month as price increases consistently outpaced pay raises. With inflation now rebounding after subsidy-driven dips and wage growth becoming more entrenched, markets expect the BoJ to continue gradual rate hike, even as higher oil prices risk reigniting cost-push inflation.”

After outflows that hit multi-year highs, flows into Switzerland and Germany Equity Funds outweighed redemptions from funds mandated to invest in the UK and Netherlands, pulling all Europe Equity Funds into positive territory. That was largely due to domestically domiciled funds, while US-domiciled Europe Equity Funds posted outflows for a third consecutive week.

That did little to dent inflows to all US dedicated Equity Funds, which were more than double last week’s figure, topping the $22 billion mark this week. US Large Cap Blend Equity Funds enjoyed a fifth consecutive inflow that was their biggest since the second week of the year while US Growth Equity Funds by all capitalizations experienced outflows.

Investors steered over $800 million into US Bear or Short Only Funds, a 29-week high, while redeeming over $5.4 billion from US Leveraged Equity Funds which marked their second-largest outflow behind a late May record from last year. In terms of the latter, four of the top 10 funds with the biggest outflows this week were benchmarked to track the Nasdaq-100 Index, single-stock ETFs included Nvidia, Lumentum, and AMD, while the top ranked spot was reserved for a Semiconductor ETF.

Global Sector, Industry and Precious Metals Funds

Although the 1Q26 corporate earnings season is now underway, flows to EPFR-tracked Sector Fund groups continue to march to the beat of the latest conflict between Iran and the US. Hopes that the ceasefire announced on April 7 will lead to an end to hostilities snapped Energy Sector Funds’ inflow streak, but investors remained cautious during the week ending April 8 with four of the six defensive groups attracting fresh money.

Healthcare/Biotechnology Sector Funds were one of the two defensive groups that experienced net redemptions, their sixth in a row and eighth over the past 10 weeks. The latest reporting period began with US President Donald Trump issuing an executive order imposing tariffs of up to 100% on patented pharmaceutical imports, and the sector is expected to have a better but still middling 1Q26 earnings season. In relative terms, net redemptions from both institutional and retail share classes are running at around 1.7% of AuM.

Among the cyclical groups, Energy Sector Funds saw an inflow streak stretching back to mid-December come to an end, with the group posting its biggest collective outflow since the second week of 2Q25, as oil prices dropped below $100 a barrel in the wake of the ceasefire announcement. Energy Transition Funds, which invest in firms involved in the shift from carbon-based fuel sources to clean energy sources, chalked up their second straight inflow and 13th over the past four months.

Technology Sector Funds posted a modest collective inflow, with globally mandated funds making the biggest contribution to the headline number. But some of the angsts about the commercialization of artificial intelligence and AI’s impact on existing software and services business model seems to have ebbed. Dedicated Software & Services Funds recorded their 10th inflow year-to-date and Artificial Intelligence Funds their 23rd inflow since the start of 4Q25.

With investors starting to rebuild their positions in gold and precious metals, both Physical Gold Funds and funds dedicated to gold miners attracted fresh money. That helped overall flows into Commodities Sector Funds hit a five-week high.

Bond and other Fixed Income Funds

After 44 straight weeks, EPFR-tracked Bond Funds started April by posting their 49th straight inflow, a run that has seen them pull in over $1.2 trillion. The latest number was more than double the previous week’s total and reflected the boost to risk appetite from the two-week ceasefire between the US and Iran, with High Yield Bond Funds snapping their longest redemption streak since early 4Q23, flows into Bank Loan Funds hitting a nine-week high and Europe Bond Funds posting their first inflow since early March.

At the asset class level, Inflation Protected Bond Funds added to their current run of inflows, Mortgage Backed Bond Funds tallied their fifth outflow during the past six weeks and funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates posted a fifth consecutive outflow for the first time in over four years.

Although US Sovereign Bond Funds extended their inflow streak, their total for the week ending April 8 was the lowest in a month. US Corporate Bond Funds, meanwhile, posted their first inflow in five weeks and their biggest since mid-February. Redemptions from all retail share classes climbed to a 13-week high.

Foreign appetite for US debt remains subdued, with overseas domiciled US Bond Funds racking up their sixth outflow over the past seven weeks and the average US allocation among actively managed European-based Global Bond Funds at a level last seen in 1Q19.

Europe Bond Funds with UK and regional ex-UK mandates attracted the biggest inflows during the first week of April, offsetting significant redemptions from Netherlands, Denmark and Switzerland Bond Funds. The redemptions from Netherlands Bond Funds were the largest since EPFR started tracking the group in 2012 and was driven by a single fund.

Investors prospecting in the Emerging Markets Country Funds showed similar levels of conviction. The latest week saw redemptions from India and Saudi Arabia Bond Funds hit 11-month and record highs while Brazil Bond Funds added to the record-setting run of inflows and both South Africa and Russia Bond Funds set new weekly marks. Overall, the first flows into US domiciled EM Bond Funds since early March were offset by a fifth straight outflow from funds based in Europe.

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