International equities shone in the week ended April 18,overshadowing outflows from U.S. domestic-focused stock funds despite news of a moderate slowdown in China’s economic growth,data from Thomson Reuters’ Lipper service showed on T hur sday.
Funds domiciled in the United States and focused on international stocks pulled in a net $1.83 billion in fresh capital versus a $2.1 billion outflow from domestically focused funds.
Overall,equity funds were left with a net outflow of $228 million. However,excluding exchange-traded funds,which are believed to anecdotally reflect institutional investment behavior,equity funds had inflows of $505 million.
The move into international equities is ironic for two reasons. One is the panic we saw last Friday with China coming out and saying its growth rate dropped,even if it was marginal,said Tom Roseen,head of research services at Lipper.
Secondly,the European sovereign debt issue has not gone away. But the cash moved in and people maybe saw that as a buying opportunity for international funds,Roseen added.
One factor that could have softened the blow of falling Chinese GDP was the expectation that the government would start spending more money. However,the government’s pro-growth policies have been in place since the autumn of 2011.
On the fixed-income side,investors pushed an additional $5.75 billion into taxable bond funds.
Flexible funds,which can buy both bonds and stocks,showed a resurgence in the latest week,pulling in $2.2 billion for its best week since early March of last year.
They get yield and capital appreciation,Roseen said. I just don’t think there is much capital appreciation in these funds left because realistically how much lower can interest rates go?
So if there is an increase in rates,then capital appreciation falls out of the equation,and you are left with yield,which isn’t very tempting,he said.
Corporate investment-grade bond funds had inflows of $1.7 billion.
Bank loan funds,which investors have increasingly turned back to after a spate of outflows from August through earlier this year,scored another strong performance this past week. The funds,which invest in bank loans on the hope that interest rates will rise,pulled in $232 million,marking the seventh straight week of net new capital.
Tax-free municipal bond funds had inflows of $159 million,marking the 19th week out of the last 20 where investors have put in fresh cash.
The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.