Global Navigator | Technology story shines through the smoke

Geopolitical tensions in the Middle East continue to escalate, with the conflict between the US and Iran showing signs of expanding as Saudi Arabia becomes more involved and an Egyptian port was struck. But that conflict’s impact on energy and other prices was not enough to shift the needle for the US Federal Reserve’s rate setters in late July, and mutual fund flows during the latest reporting period showed that investor faith in the potential of artificial intelligence remains largely intact. Furthermore, investors are still willing to take risks to maximize their exposure to that AI story.

For an eighth consecutive week, Leveraged Equity Funds attracted fresh money with a $10 billion inflow starting off the run and an average of $3.5 billion flowing in over the next seven weeks. Meanwhile, Bear Funds notched their seventh outflow over the same period. Looking at cumulative fund-level flows during this eight-week span:

• Bear Funds: A single fund with bearish exposure to Semiconductors has seen over $1 billion redeemed, three of the top 10 with biggest outflows are Crude Oil Funds, andtwo are benchmarked to the Nasdaq 100 index.
• Leveraged Funds: A single fund with leveraged exposure to Semiconductors has seen over $8 billion added, another $7 billion collectively flowed into three single-stock SK Hynix ETFs, while the third ranked was also benchmarked to the Nasdaq 100.

The market’s focus on conflict in the Middle East and AI’s risks and rewards has allowed concerns about private credit to fade – for now – into the background. Before the US-Iran conflict broke out in late February, regulator warnings and the restrictions imposed by several well-known private credit funds on investor redemptions made non-bank lending one of the most widely discussed risks. But the latest week saw Private Credit Funds post their sixth inflow since mid-June and their biggest since early April.