Investors continue to take the short route in early May

Reflecting on interest rate decisions by policymakers in the latest central bank meetings and penciling in expectations for cuts or hikes by year-end, ceasefire optimism bouncing back again, some businesses receiving tariff refunds, and the S&P 500 setting a new record high above 7,000 USD, left plenty for investors to sift through.

Flows into all US Equity Funds benchmarked to the S&P 500 were positive for the seventh time in past eight weeks. Looking at the short and long S&P 500 benchmarks, investors have pumped fresh money into US Equity Funds with S&P 500 (-3x) or (-2x) while pulling away from their leveraged counterparts. Overall, Bear Funds extended their inflow streak to six weeks, and Leveraged Funds continued a five-week redemption run. Are investors taking a more risk-averse stance?

The first week of May marked the largest inflow since the start of 4Q25 for Alternative Cryptocurrency Funds – which invest directly into cryptocurrencies or into related futures and contracts – as a single Bitcoin ETF took in over $1 billion. Also seeing healthy flows over the past 10 months are Equity Crypto Funds – whichinvest in companies that operate in blockchain tech or crypto mining – as they posted their 39th inflow of the past 42 weeks. Two single-stock ETFs investing in Bitmine Immersion Technologies (BMNR) and Circle Internet Group (CRCL) each absorbed $19 million and flows as a percentage of assets ranged from 5% to 36% for 11 ETFs with a fund tracking IREN at the top of the scale.

More broadly, there was no love to spare for Europe and Emerging Market Equity Funds, flows into Argentina Equity Funds halted, tech and CSI 300 benchmarked funds pull the headline number down for Chinese mainland equities, UK Equity Funds posted their biggest outflows since 2022, and Copper Funds saw record outflows despite a climb in prices.

Overall, for every $1 committed to Equity Funds another $10 was pumped into Bond Funds as flows for fixed income reached nearly $26 billion total. Money Market Funds tookin over $135 billion which wasthe biggest sum since the first week of the year and snapped a three-week run of outflows.Another $1 billion flowed into Balanced Funds and Alternative Funds attracted $4.8 billion.

Emerging Markets Equity Funds

EPFR-tracked Emerging Markets Equity Funds posted their third largest outflow on record and extended their redemption streak to four weeks, $38.6 billion total. Sentiment towards Latin America Equity Funds dimmed as the group eked out a modest inflow, while investors continued to steer away from Asia ex-Japan Equities. The diversified Global Emerging Markets (GEM) Equity Funds snapped a five-week inflow streak, and EMEA Equity Funds posted a second consecutive week of outflows.

Flows into Latin America Equity Funds in general, and Argentina Equity Funds, in particular, hit a wall during the first week of May. Outflows climbed to a near 10-month high for Argentina Equity Funds and Mexico Equity Funds recordedtheir eighth outflow of the past nine weeks, nearly offsetting inflows for Brazil Equity Funds. 

Redemptions from Chinese Mainland Equity Funds hovered around the $10 billion mark for a fourth straight week. A Technology Sector ETF accounted for a tenth of that headline number, while three of the top five funds with the biggest outflows this week were benchmarked to CSI 300. But flows to GEM ex-China Equity Funds are also fading. Among the other emerging Asian country fund groups, Korea Equity Funds reverted to outflows – their third of the past four weeks – redemptions from India Equity Funds climbed to a four-week high, while Taiwan (Province of China) Equity Funds took in a third consecutive weekly inflow. 

UAE deciding to quit OPEC after nearly six decades. The US-Israeli conflict with Iran pushing into its 10th week. A slow-to-reopen Strait of Hormuz.  Brent Crude oil reaching a four-year high in the latest week. There’s little to shy away from in the EMEA space. After strong flows mid-February to early April, flows to UAE Equity Funds are muted or have turned negative. Meanwhile, flows into South Africa Equity Funds climbed to a four-week high.

Developed Markets Equity Funds

The first week of May ended with optimism about an end to the fighting between the US and Iran – not for the first time – on the rise. As before, this provided a strong tailwind for US equity markets and the funds that invest in them. EPFR-tracked Developed Markets Equity Funds chalked up their sixth consecutive inflow, and 14th over the past 15 weeks, on the back of solid flows into US, Global, Australia and Canada Equity funds and modest flows into Japan Equity Funds.

Once again, Europe Equity Funds were the outliers as the group experienced net redemptions for the fourth week running, thereby adding to their longest outflow streak since 1Q25. US domiciled funds posted their biggest collective outflow since 4Q24 and funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates, which posted only three weekly outflows in excess of $1 billion between 2Q22 and 4Q25, saw over $1 billion flow out for the fourth time year-to-date.

At the country level, Switzerland Equity Funds posted their biggest outflow in over eight months, UK Equity Funds recorded their largest inflow since 2Q22, investors pulled money out of Germany Equity Funds for the ninth time over the past 10 weeks and Spain Equity Funds extended their longest redemption streak since the middle of last year.

The energy price shock that concerns many investors is hitting Europe unevenly. Credit card data from sister company CEIC shows that German consumers, who face a larger fuel cost shock, are cutting entertainment and travel while their counterparts in the UK have largely maintained pre‑war spending patterns, possibly by drawing on savings. Total card spending in both countries remains above pre‑war levels and show a pattern of reallocation rather than retrenchment.

Meanwhile, US Equity Funds kicked off May by posting their sixth consecutive inflow, with funds based overseas accounting for over a third of the headline number. Large Cap Mixed Funds recorded the biggest inflow in dollar terms and Small Cap Value Funds in % of AUM terms while funds managed for growth outperformed their value counterparts across all capitalizations.

Japan Equity Funds posted a modest inflow that was evenly split between retail and institutional share classes. With the Bank of Japan intervening to support the yen, investors found themselves revisiting calculations about the cost of US dollar denominated inputs versus the competitive advantage for exporters of a weak currency.

The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, tallied their 50th inflow over the past 12 months with the bulk of the fresh money going to funds with fully global mandates.

Global Sector, Industry and Precious Metals Funds

During the first week of May the US, Israel and Ukraine further depleted their military inventories, consumers on both sides of the Atlantic adjusted to sharply higher fuel prices, several energy companies reported bumper profits and technology majors continued to shift their spending from people to artificial intelligence (AI) infrastructure.

Against this backdrop, six of the 11 major EPFR-tracked Sector Fund groups posted outflows that ranged from $78 million for Utilities Sector Funds to $2.7 billion for Technology Sector Funds. On the other side of the coin, Industrials, Infrastructure and Energy Sector Funds all pulled in over $1 billion.

The latest flows into Energy Sector Funds were the biggest since the final week of March and went largely to funds offering exposure to conventional fuel sources such as oil and coal. Of the top 10 funds ranked by flows for the week, there was only one with an SRI/ESG designation and that was in 10th place.

The higher energy prices that drew money into energy funds are a major headwind for the consumption that is a key driver of economic growth, and redemptions from Commodities Sector and Consumer Sector Funds climbed to six and 22-week highs, respectively. Dedicated Copper Funds experienced record-setting redemptions even though the price of ‘red gold’ tested the all-time high it set in late January.

Flows to and from Technology Sector Fund groups told a complicated story. The headline number was the fourth biggest over the past year, and five of the 10 funds that posted the biggest outflows have semiconductor mandates. Investors also pulled back from Software & Services Funds. But combined flows to dedicated Artificial Intelligence (AI) and Data Centers & Digital Infrastructure Funds exceeded $1.2 billion.

Bond and other Fixed Income Funds

The first week of May saw flows into all EPFR-tracked Bond Funds climb for the third week running, hitting their highest level since the third week of February and taking the year-to-date total close to $330 billion. Roughly two-thirds of the net flows found their way into US-mandated funds while Global and Europe Bond Funds absorbed over $2.5 billion apiece and Emerging Markets Bond Funds tallied their fourth straight inflow.

Emerging markets debt, which had fallen into the fourth quintile of EPFR’s weekly Multi Asset Rankings a month after the US struck Iran, has climbed back into the top quintile, with US sovereign and municipal debt pushed down to the next level. The latest flows into Emerging Markets Bond Funds favored local currency funds dedicated to Asian markets, with Chinese Mainland, Thailand and India Bond Funds all recording strong inflows.

Flows into foreign domiciled US Bond Funds climbed to a 16-week high during a week when yields on two and 10-year Treasuries both climbed to nine-month highs and the 30-year Treasury yield touched 5%. Investors kept a tight grip on duration risk, with flows into Short and Intermediate Term Funds coming in at five and 12-week highs, respectively, and snapped US High Yield Bond Funds’ latest inflow streak.

Also hitting a 12-week high were flows into US Inflation Protected Bond Funds, which contributed to the biggest weekly inflow for all IP Bond Funds since the first week of 2Q25. Investors were digesting a March reading for the core Personal Consumption Expenditure (PCE) index that was the highest since January 2024.

Future inflation remains a major concern for investors looking to Europe, with Europe IP Funds adding to their longest run of inflows since 1Q22. Those investors, who gravitated to funds with corporate mandates during the first two months of the year, are now favoring funds dedicated to sovereign debt. While showing modest appetite for high yield debt, they are showing interest in funds dedicated to the UK whose 10-year sovereign bond yield is 185 basis points higher than the comparable German note. While UK sovereign yields are still significantly higher than the return on Japanese Government Bonds (JGBs), yields for the latter are being driven higher by rising inflation and the Japan’s persistent fiscal deficits. Japan Bond Funds have absorbed fresh money 10 of the past 11 weeks but, after peaking in mid-March, those inflows have steadily lost momentum.

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