Global Navigator | Bond Fund flows maintain record pace

The second quarter ended with investors using a recent sell-off among technology stocks as an entry point, the Dow Jones Industrial Average at record highs, oil prices back below $70 a barrel as the US and Iran continued to negotiate the terms of a permanent peace deal, extreme weather patterns across several continents, the aftershocks of SpaceX’s record IPO rippling through US markets and flows into EPFR-tracked Bond Funds running well ahead of last year’s record-setting pace.

After setting two inflow records flowed by a new outflow mark over the previous three weeks, Technology Sector and Semiconductor Funds enjoyed strong inflows during the latest reporting period that more than offset the previous week’s redemptions and, in the case of Semiconductor Funds, set a new weekly record. Dedicated Artificial Intelligence Funds, however, posted their biggest outflow since EPFR started tracking them in 1Q06.

Against a backdrop of heatwaves in Europe and the eastern US, lagging monsoon rains and tropical storms hitting Japan and Southeast Asia, Equity Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates experienced their heaviest redemptions since mid-December while SRI/ESG Bond Funds chalked up their 11th inflow over the past 12 weeks.

Overall, the week ending July 1 saw Equity Funds post a collective outflow of $13.8 billion and year-to-date flows into Bond Funds hit 62% of last year’s record setting totals. Investors steered a net $148 million into Balanced Funds and $54.9 billion into Money Market Funds while Alternative Funds posted their second largest outflow of the year so far. The latest redemptions from Alternative Funds came as the price of the major cryptocurrency, Bitcoin, fell to a 21-month low as fading expectations of further US interest rate cuts prompted institutional investors to shift back to more conventional asset classes. The Federal Reserve’s hawkish stance also clipped the wings of physical gold and silver, both of which saw their price touch seven-month lows in June.

At the asset class and single country fund levels, Derivatives Funds posted their first outflow in over four months, Synthetic Funds extended their longest redemption streak since 4Q11 and flows into High Yield Bond Funds hit a 57-week high. Russia Bond Funds tallied their first outflow since mid-November and their biggest since late 1Q23 while Russia Equity Funds posted their eighth outflow of the quarter and Singapore Equity Funds tallied their 24th inflow YTD.

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