Investors stampeded out of stock and bond funds over the past week, moving into haven assets reflecting the initial shock surrounding the UK’s vote to leave the EU.
Equity funds suffered outflows of more than $ 20bn for the week ending Wednesday, according to data from EPFR, its largest one-week outflow since August 2015 when concern about China’s economy rocked global markets. Bond funds saw almost $ 1.4bn of outflows in the week.
Equity outflows were largest in the US, where investors withdrew $ 11.5bn, while European equities lost more than $ 5bn and UK equities lost more than $ 600m.
Equity markets had more than $ 3tn wiped off their value over the two days following the UK’s vote for Brexit on June 23. Turmoil hit markets, with indicators of financial volatility rising sharply, prompting some investors to seek out assets deemed to be less risky and able to weather the storm.
US money market funds had inflows of $ 14.86bn, according to data from the Investment Companies Institute, while EPFR said gold funds received $ 2.5bn. Utilities, mortgages and inflation-protected securities also had inflows.
Over the past few days markets have calmed. The CBOE’s Vix volatility index has fallen back to 15.63 from a peak of more than 26 on Monday. But some investors remain cautious, fearful of overvalued stock prices and uninspired by low-yielding bonds.
“Serious investors are actually looking at cash as a serious investment,” said Nardin Baker, chief strategist for global alpha at Guggenheim. “They otherwise have a choice for serious risk in equities or low returns in fixed income.”
On a quarterly basis, European equities posted their biggest outflow on record, according to EPFR, and Japanese equity funds had their worst three months since the first quarter of 2008. US equity funds have had more than $ 100bn of redemptions so far this year.
Other asset classes have fared better. Dedicated gold funds added $ 6bn in the second quarter, building on the $ 10bn inflows from the first quarter. Investment-grade bond funds, meanwhile, have had more than $ 50bn of inflows this quarter, in stark contrast to investors shunning junk bonds.
The fund flow data, which runs through to Wednesday, reflects only part of the market recovery this week.
“The performance of the assets classes [over the past few days] has been quite encouraging. It seems like the market is digesting the effect of Brexit on the global economy, on the eurozone, etc,” said Bertrand Delgado, a director at HSBC.
“We are in a relatively uncertain period and people are trying to assess the actual impact — short term and medium term. The flows to a certain extent this week represent some deterioration in risk appetite. We will see what the next round of flows will show.”
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