Investors stick to the script in late January

Equity funds dedicated to the Chinese mainland posted another record outflow in the fourth week of 2026 as authorities tap the brakes on a stock market rally that started 15 months ago. The latest reporting period ended with the benchmark Shanghai Composite Index closing within 290 points of its peak before the mid-2015 correction.

While the massive redemptions from China Equity Funds dominated the headlines, flows to other fund groups suggest rising appetite for emerging markets assets, hunger for income-producing assets and, for some investors, more defensive strategies based on precious metals, investment grade debt and diversification. Dividend Equity Funds chalked up their 43rd inflow since the beginning of 2Q25, flows into Global and Global Emerging Markets (GEM) Equity hit five-year and record highs, Physical Gold Funds took in fresh money for the 12th straight week, and all Investment Grade Bond Funds extended an inflow streak stretching back to early May.

With corporate earnings reports coming in at a brisk clip, investors made significant adjustments to their sector exposure with five of the 11 major EPFR-tracked Sector Funds absorbing over $1 billion.

Overall, the week ending Jan. 28 saw another $15.4 billion flow out of Equity Funds while Bond Funds recorded a collective inflow of $16.9 billion. Balanced Funds pulled in a net $941 million, Money Market Funds $10 billion and Alternative Funds $10.4 billion.

At the single country and asset class fund levels, flows out of Switzerland Equity Funds and into Switzerland Bond Funds climbed to 23 and 44-week highs, respectively, Brazil Bond Funds took in fresh money for the 16th week running and Israel Equity Funds recorded their biggest inflow in nearly five years. Physical Silver Funds experienced record-setting redemptions, flows into all Bear Funds climbed to an 18-week high and Solar & Wind Funds tallied their biggest weekly inflow since mid-4Q22.

Emerging Markets Equity Funds

As was the case the previous week, record-setting redemptions from Chinese mainland-mandated funds pulled the headline number for all EPFR-tracked Emerging Markets Equity Funds into the same territory. Those eye-catching outflows again masked broad-based appetite for emerging markets’ equity. The diversified Global Emerging Markets (GEM) Equity Funds set their third straight weekly inflow record and Latin America Equity Funds smashed their previous record set in early 4Q10 while EMEA Equity Funds posted their biggest inflow since 1Q23.

Drilling down, retail share classes posted consecutive weekly inflows for only the second time during the past 18 months, EM Leveraged Equity Funds recorded their biggest inflow since early 2Q25 and funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates set a new weekly inflow record.

The headline number for Latin America Equity Funds was driven by flows into regional and dedicated Brazil Funds. In relative terms, however, Chile and Peru Equity Funds enjoyed another week of above average inflows during a week when Physical Copper Funds posted their biggest inflow since mid-1Q23. Interest in the region has also been bolstered by the recent free trade agreement between the European Union and the Mercosur nations (Brazil, Argentina, Uruguay and Paraguay).

In a recent note to clients, economists from EPFR’s sister company CEIC wrote that, “The deal could shore up a relationship that had been waning in recent years…the deal (which has yet to be ratified by legislatures) would eliminate tariffs on more than 90% of goods for both parties, including some of those politically sensitive farm products subjected to quotas. It also opens public procurement markets, liberalizes investment flows, and aims to harmonize technical and safety standards. Mercosur nations lag behind the Europeans in [terms of] competitiveness terms – according to the World Economic Forum, human capital, skilled labor and innovation ecosystems account for that gap – but Latin America is competitive when it comes to wages.”

EMEA Equity Funds pulled in over $400 million, with investors remaining focused on fund groups offering exposure to emerging European markets such as Poland and Romania. Markets that benefit from lower energy prices also attracted their attention, with Turkey Equity Funds posting their third inflow of 2026 after chalking up 11 outflows during the final quarter of last year.

It was another good week for Korea Equity Funds, which continue to benefit from investors’ appetite for credible AI and reform stories, the winding down of the political tensions stoked by the country’s previous president and the relative lack of friction with North Korea. Coming into the New Year, Korea’s average allocation among actively managed GEM Equity Funds stood at a its highest level since mid-1Q14 while Chinese mainland and India’s weightings were at 16 and 31-month lows, respectively.

Developed Markets Equity Funds

Going into the final days of January, EPFR-tracked Developed Markets Equity Funds posted their second inflow of the year as flows to US Equity Funds rebounded and Global Equity Funds pulled in over $16 billion ahead of the US Federal Reserve’s latest policy meeting. The benchmark S&P 500 index hit a new record high during the week, which also saw the price of gold break through the $5,000 an ounce level.

Europe Equity Funds were the only major group to post an outflow as Switzerland, UK and Europe ex-UK Regional Equity Funds all saw over $500 million flow out. Among the headwinds facing the region are the standoff with US President Trump over control of Greenland, along with the attendant threats of additional tariffs, and the impact of a strong Euro on the export competitiveness of the countries in the currency union. Europe-mandated funds also offer significantly less exposure to technology plays than their US and Japanese counterparts.

Information technology stocks still account for over a third of the average US Equity Fund portfolio. Those funds recorded solid inflows during the fourth week of January that favored Large Cap Blend Funds, with Mid Cap Blend Funds also seeing fresh money and Small Cap Value Funds posting their biggest collective inflow since late 3Q25. Retail share classes extended an outflow streak stretching back to early August.

Australia Equity Funds attracted three times the amount of fresh money committed to Japan Equity Funds during the latest week as Japanese voters prepared for the third general election since October 2024. If next week’s snap election strengthens Prime Minister Sanae Takaichi’s mandate, the country’s first female leader is expected to push a reflationary agenda that could push the country’s borrowing costs to uncomfortable levels.

The largest of the diversified Developed Markets Equity Fund groups, Global Equity Funds, saw cumulative flows during their current run of inflows pass the $100 billion mark. Japan-domiciled Global Equity Funds have not posted an outflow since late 2023 while those based in the US last experienced net redemptions in early 2Q25.

Global sector, Industry and Precious Metals Funds

For the second time this month, the total trading volume for the 11 EPFR-tracked Sector Fund groups reached an all-time high with eight sectors posting inflows. Commodities/Materials Sector Fund inflows accounted for over 40% of that activity, followed by Technology Sector Funds at 16% – a rebound from the previous week’s outflow – and Industrials Sector Funds at 12%. On the other side, Consumer Goods, Utilities and Real Estate posted outflows averaging $600 million, though the latter was much lower on the scale.

Energy Sector Funds posted their eighth-largest inflow on record and biggest since 4Q23, extending their inflow streak to six weeks and $7 billion total.  A single fund benchmarked to the S&P Energy Select Sector attracted over $750 million. Energy Sector Funds with SRI/ESG mandates have recuperated from the over $8 billion flowing out in 2024. In the past three months through to Jan 28, these funds have seen over $1.7 billion flow in, topping last year’s full-year inflow of $1.4 billion.

Industrials Sector Funds maintained their strong start to the year. At the individual fund level, the fund seeing the biggest inflows year-to-date is a Chinese mainland domiciled ETF that invests in grid equipment. Among the other 25 funds with inflows above $100 million this year, 14 are Aerospace & Defense ETFs, racking up a combined $4.8 billion, and two follow construction machinery and transportation industries.

A record-setting $2.3 billion flowed out of Commodities/Materials Sector Funds last January, sharply contrasting the $25 billion that has flowed in during the first four weeks of this year. Inflows pushed the envelope for a third consecutive week, this time reaching nearly $10 billion.

At the fund-level, three Chinese mainland domiciled funds tracking non-ferrous metals have racked up a collective $4.6 billion year-to-date, and another three Chemical Funds domiciled to the same country have seen inflows of $3.1 billion collectively. One of each of these non-ferrous and chemical funds were also in the top three spots for funds with the biggest inflows in all of 2025. A single US-domiciled Copper Mining Fund has pulled in $1.3 billion this year, and over $2 billion has flowed into four funds with mixed domiciles investing in rare earths.

Bond and other Fixed Income Funds

The latest week saw EPFR-tracked Bond Funds post their fourth inflow of the New Year, and 49th over the past 12 months, as the US Federal Reserve became the second major central bank to keep its key interest rate on hold.

The week ending Jan. 28 did see Global Bond Funds post their first outflow since mid-October and their biggest since late June, while Chinese mainland mandated funds surrendered over $2 billion for the fourth week running. But inflows were the norm for most of the major groups. Those ranged from $15 million for Asia Pacific Bond Funds to $16 billion for US Bond Funds.

At the asset class level, flows into Collateralized Loan Obligation (CLO) Bond Funds hit a 41-week high, Ultra Short Term Bond Funds absorbed fresh money for the 41st time over the past 42 weeks and Municipal Bond Funds set a new inflow mark that narrowly topped the previous record set last September. Elsewhere, Inflation Protected Bond Funds tallied their biggest outflow in over nine months despite above target price growth in the US, Australia and the UK.

Emerging Markets Bond Funds snapped their latest outflow as redemptions from China Bond Funds were offset by the biggest inflow recorded by the diversified Global Emerging Markets (GEM) Bond Funds since the fourth week of 2023. Retail flows to GEM Bond Funds hit their highest level, in US$ terms, since 1Q21. While China Bond Funds have seen money pour out, China-dedicated Convertible Bond Funds continue to attract fresh money. Issuance also remains strong.

Investors steered fresh money into US Bonds for the 40th consecutive week, with flows into US Sovereign Bond Funds hitting their highest level since early October. However, foreign domiciled US Bond Funds tallied their first outflow since mid-June and Global Bond Funds, which on average allocate over 40% of their portfolios to US debt, posted their biggest outflow in nearly seven months.

Europe Corporate and Mixed Bond Funds both absorbed over $1 billion, offsetting further outflows from their sovereign counterparts. At the country level, Sweden, Switzerland and Austria Bond funds enjoyed above average inflows, and Italy Bond Funds chalked up their 16th consecutive inflow.

Flows to Japan Bond Funds stalled in late January as investors looked ahead to the outcomes of a snap election and the Bank of Japan’s first policy meeting of the year. A decently supported auction of 40-year notes on the final day of the reporting period boosted sentiment after the previous week’s turmoil.

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