Energy security calculations favor the Americas in mid-May

Physical distance from the Middle East and healthy supplies of domestic fossil fuels have real benefits when it comes to shaping investor sentiment. The second week of May ended with US Equity Funds posting their seventh consecutive inflow, US Bond Funds extending an inflow streak that stretches back to early 2Q25, Latin America Equity Funds adding to their longest run of inflows since 1H07 and Latin America Bond Funds absorbing fresh money for the 15th straight week.

With perceptions of future energy prices still driving markets, and crude oil still commanding around $100 a barrel, the latest week’s flows again reflected a bearish undercurrent to the broader ‘risk on’ story and the high-flying equity markets. Inflation Protected Bond Funds saw their current run of inflows hit 15 weeks and $9.2 billion total, Bear Funds chalked up their seventh consecutive inflow and Leveraged Funds their sixth straight outflow, respectively, and Physical Gold Funds snapped their latest – and short-lived – outflow streak.

While US Equity and Bond Funds top the list of funds ranked by cumulative daily inflows since Feb. 28, several groups linked to markets with a high dependency on imported oil such as Korea, Japan and Taiwan (Province of China),also feature. When using a relative measure, several Emerging Markets Country Bond and Money Market Fund groups as well as those dedicated to fossil fuels appear in the top 15.

The latest week saw funds dedicated to private credit post their seventh straight inflow. The systematic risks posed by this asset class have been hotly debated in recent months, and research by EPFR’s Kirsten Longbottom shows that Private Credit ETFs are increasingly being used to take short positions.

Overall, the week ending May 13 saw all Equity Funds record a collective inflow of $20.4 billion while Balanced Funds took in $1.2 billion, Alternative Funds $4.1 billion, Money Market Funds $ 5.7 billion, and Bond Funds a 20-week high of $28 billion.

At the asset class and single country fund levels, Canada Equity and Bond Funds both attracted over $500 million, Indonesia Equity Funds posted their biggest inflow since early December and redemptions from Greece Bond Funds hit their highest level in over 29 months. Dividend Equity Funds recorded their 17th inflow year-to-date, and Software & Services Funds their fifth over the past seven weeks, investors pulled over $1 billion out of Cryptocurrency Funds and Autocallable Funds extended an inflow streak that started in early 3Q25.

Emerging Markets Equity Funds

Redemptions from Emerging Markets Equity Funds during the latest reporting period were more than double the previous week’s outflow. This was largely due to the outflows from Chinese Mainland Equity Funds, while GEM Equity Funds saw their biggest outflow since mid-March and flows to EMEA Equity Funds were essentially neutral. Swimming against the current, Latin America Equity Funds posted another solid inflow.

There was some renewed interest for foreign domiciled Chinese Mainland Equity Funds as the group posted a seven-week high inflow. That was backed by the largest inflows for US domiciled China Equity Funds since the end of 2Q25, and funds domiciled in Hong Kong (SAR of China) posting their fourth inflow of the past five weeks. But domestically domiciled funds dominated the story this week as funds tracking the CSI 300 – the largest benchmark for this country fund group – pulled the headline number down for Chinese Mainland Equity Funds, as did funds benchmarked to the CSI 500. After a strong fourth quarter, some benchmarks are seeing investors exit quickly.

Among the other Asia ex-Japan Country Fund groups, those dedicated to India started off the week with their biggest daily inflow year-to-date but that was almost completely reversed in the days that followed as the country’s dependency on imported oil continued to bite. India Equity Funds barely eked out a weekly net inflow that snapped the group’s 11-week outflow streak totaling nearly $6 billion. Meanwhile, Indonesia Equity Funds took in a 23-week high inflow and extended their streak to four weeks, while redemptions from Thailand Equity Funds climbed to a 10-week high.

The wall that Latin America Equity Funds ran into last week was lifted in the latest week as positive sentiment made a quick return. CEIC data shows that following the Middle East supply disruptions, “high-frequency port data confirms the price-led export uptick, with oil shipments rising notable through Paranaguá – one of the largest ports in Brazil – as global buyers rerouted supply away from GCC-dependent routes.” In the latest week, flows into Brazil Equity Funds marked a four-week high and their 17th inflow of the past 18 weeks.

Developed Markets Equity Funds

Flows into all EPFR-tracked Developed Market Equity Funds were triple the size of last week’s inflow as the group took in an eight-week high above $45 billion.  Countries the farthest away from the Middle East conflict benefitted with US Equity Funds continuing to absorb fresh money, flows into Global Equity Funds hitting a record-high above $20 billion and Asia Pacific Equity Funds taking in a third consecutive weekly inflow, while investors exited Europe overall.

The past seven consecutive weeks of inflows for US Equity Funds have averaged $16.9 billion and the latest topped that. Of the top 10 funds with the biggest inflows this week, five were benchmarked to the S&P 500 and two were tracking Nasdaq-100. Just halfway through the second quarter, flows into domestically domiciled US Equity Funds have reached $90 billion (or 0.7% of assets), nearly doubling the size of flows received during 1Q26. But relative flows have been stronger for foreign domiciled funds in the second quarter, reaching 1.2% of assets.

Recent CEIC research highlighted how “the disruption to Middle East crude flows is not just about the immediate price shocks hitting markets for gasoline, jet fuel and fertilizer. The crunch is now rippling through the system – from the upstream petrochemical sector to many downstream supply chains, especially in Asia.” Prices of Naphtha have surged since the conflict, with South Korea – one of the world’s most naphtha intensive – impacted heavily, and Japan also structuring its petrochemical operations on imported naphtha, largely from the Middle East. Japan Equity Funds absorbed a third consecutive week of inflows in mid-May.

For the fifth straight week, Europe Equity Funds by all capitalizations – Small, Mid and Large Cap – posted outflows, but the redemption streaks for Small and Mid Cap Europe Equity Funds stretched back to early March.

While Europe ex-UK Regional Equity Funds dragged the headline number into negative territory, at the country level, redemptions from Norway Equity Funds hit an eight-week high, it was the biggest outflows for Belgium Equity Funds since end of 2024, and Austria Equity Funds have seen relatively consistent outflows since mid-2025. Meanwhile, Switzerland Equity Funds saw their first inflow in two weeks.

Global Equity Funds, the largest of the major diversified Developed Markets Equity Fund groups, posted a record-high inflow of nearly $16 billion, their 12th straight inflow and 22nd since mid-August, a run that has seen over $115 billion flow into these funds.

Global Sector, Industry and Precious Metals Funds

A banner earnings season for US companies began to wind down during the week ending May 13. The first quarter reports have bolstered investors’ faith in the technology sector and its multi-billion dollar push into artificial intelligence (AI). But they have not dispelled fears about the ability of consumers in the US and elsewhere to weather the energy price shock triggered by the current conflict between the US and Iran.

During the latest week, seven of the 11 major EPFR-tracked Sector Fund groups recorded net inflows, with Technology Sector Funds posting their third-largest inflow of 2026 and Infrastructure Sector Funds pulled in another $1.4 billion with two-thirds of that total going to dedicated Data Infrastructure Funds. Although there has been strong appetite for semiconductor plays, some fear this segment of the market is now overvalued given the questions hanging over the return on AI investments and growing shortages of naphtha, a key input in the manufacturing process for silicon chips. Dedicated Semiconductor Funds posted their sixth consecutive outflow despite the sub-sector’s strong performance.

The association with AI infrastructure also gave Rare Earth Funds a lift. They posted their seventh straight inflow, and their biggest since early March, during a week when overall flows into Commodities Sector Funds bounced back from the previous week’s outflow.

It was a better week for Real Estate Sector Funds, which chalked up their first inflow since mid-March and biggest since mid-December despite lackluster US home sales data for April. Flows into US and Japan Real Estate Funds hit 48 and 57-week highs, respectively, while Europe-mandated funds experienced net redemptions for the 17th week running.

Among the groups posting outflows during the second week of May, Energy Sector Funds tallied their third outflow of the year, Consumer Goods Sector Funds posted their 25th outflow since the beginning of November and Industrial Sector Funds saw money flow out for only the third time during the past 12 months as Aerospace & Defense Funds experienced record redemptions.

Bond and other Fixed Income Funds

For EPFR-tracked Bond Funds, the tide of flows continued to rise in mid-May. They ended the latest reporting period with their biggest weekly inflow in nearly five months as all of the major geographic and asset class groups attracted fresh money. As has been the case since mid-March, the headline number was driven by institutional money with retail share classes posting their eighth outflow over the past 10 weeks.

At the asset class level, flows into funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates climbed to a 12-week high, Inflation Protected Funds pulled in another $786 million, High Yield Bond Funds posted their sixth straight inflow and Catastrophe Bonds their eighth and Ultra Short Bond Funds absorbed over $1 billion for the first time in nearly two months.

Emerging Markets Bond Funds attracted over $2 billion, with local currency funds taking in $2 for every $1 committed to their hard currency counterparts and the diversified Global Emerging Markets (GEM) Bond Funds making the biggest contribution to the headline number. Over the past 16 months, managers of those funds have been rotating exposure from Emerging Asian markets to with energy stories – Brazil, Nigeria, Kazakhstan, Argentina and Ecuador – that are not fully realized.

Europe Bond Funds recorded their biggest weekly inflow since the first week of 4Q25, with corporate-mandated funds attracting twice as much fresh money as Europe Sovereign Bond Funds. At the country level, UK Bond Funds recorded inflows for the fifth time over the past six weeks despite concerns the current Labour government is heading towards a leadership struggle that will be resolved in favor of even greater public spending.

Flows into US Bond Funds favored those offering exposure to short and intermediate-term debt. Overseas domiciled funds recorded their biggest inflow since the second week of the year, with funds based in Japan having their best week in over 18 months.

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