More of the same inflows for Europe

22 May 2017Weekly Fund FlowsPeriodicalEuropeStrategyWeekly Fund FlowsDate22 May 2017Deutsche BankMarkets ResearchMore of the same inflows for EuropeLast week’s (Wed-Wed) review of funds’ in/outflows as % of funds’ AuM.Last week's political turmoil surrounding the Trump's administration's ties toRussia put a damper on investors' appetite for developed market risk assets asUS equity funds lost money for the seventh in nine weeks. As had been the casein the recent past, European equity funds once again stood to gain from USredemptions, securing inflows for an eighth consecutive week (albeit somewhatmuted after the record inflow surge of the week prior).The fall in European relative macro uncertainty as well as the rise in Europe'srelative growth momentum continues to put emphasis on the rotation of US-domiciled flows into Europe. Relative macro surprises in particular (with Euro areamacro surprises holding up, while those in the US have fallen sharply) have lenta strong support in the past three weeks as US-domiciled funds investing intoEuropean equities received a sum of $4.5 billion while US-domiciled flows withUS mandates saw $18 billion of redemptions (see bottom left chart). Over thesame period, European equity funds, regardless of domicile, have seen $7 billionof inflows (see bottom right chart).Figure 1: US investors shift focus to Europe as relativemacro surprises rise sharply-15% -10% -5% 0% 5% 10% 15% 20% -150 -100 -50 0 50 100 150 200 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Macro surprises, lhs 1-month flows into equity fund mandates with US domicile Europe rel to US Source: EPFR Global, Datastream, Deutsche Bank calculationsFigure 2: Since mid-March, US equity funds have seen$34bn of outflows but Europe $14bn of inflows-15 -10 -5 0 5 10 15 20 25 30 -120 -100 -80 -60 -40 -20 0 20 40 60 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Thousands Thousands Cumulative flows into equity funds, in USDbn US Europe Japan, rhs Source:EPFR Global, Deutsche Bank calculationsAndreas BrucknerStrategist+44-20-754-18171Sebastian Raedler, PhDStrategist+44-20-754-18169Wolf von RotbergStrategist+44-20-754-52801Tom Pearce, CFAStrategist+44-20-754-16568Deutsche Bank AG/LondonDeutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should considerthis report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONSARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.Distributed on: 22/05/2017 20:36:10 GMT0bed7b6cf11c 22 May 2017Weekly Fund FlowsFigure 3: Flow data on funds (allincluding ETFs)Total assets in EPFR sample ($bn)12m cum. flow as % of 4wk avg. flow as % of Total equity funds9,1731.30.1 Total Developed Market equity funds8,1701.10.0US equity funds4,4510.90.0Western Europe equity funds1,255-4.00.2Japan equity funds8.3-0.2Asia Pacific equity funds8.1-0.1 Total Emerging Market equity funds1,0033.10.3GEM equity funds9.40.4EMEA equity funds-0.5-0.2Latin America equity funds2.1-0.3Asia ex-Japan equity funds-4.50.1Total bond funds4,3355.90.2 Corporate High Yield funds2.30.1 US bond funds2,3177.30.2 Western Europe bond funds-0.60.1 Emerging Markets bond funds15.00.5 Asia ex-Japan bond funds3.50.1 Latin America bond funds5.80.4Money Market funds3,8330.60.1Global Sector fundsCommodities/Materials13.9-0.8Consumer Goods-8.50.5Energy4.31.5Financials21.80.3Health Care/Biotech-1.3-0.3Industrials49.71.8Infrastructure3.80.4Real Estate0.2-0.7Technology12.32.3Utilities-4.5-1.0Europe country equity fundsGermany-4.30.3UK-3.4-0.1France-5.30.1Switzerland0.8-0.2Thematic FundsConvertible bond funds-7.10.3Inflation Protected bond funds17.50.0Source: EPFR Global, Deutsche Bank calculationsBonds (+), equities (+) and MM (+): Total equity funds (-0.0%, MFs:-0.1%, ETFs:+0.1%) experienced marginal outflows as strong redemptions across DM funds(-0.1%, with Europe being the only exception) slightly outweighed EM equity fundinflows (+0.4%) . Total bond funds (+0.2%) continued to gain momentum for theninth consecutive week as US bond funds saw strong take-ins (+0.2%), whileflows for the generally volatile MM funds flipped signs from previous week'sinflows (-0.5%, lowest in 17 weeks).DM equity funds (-) with Europe (+) vs. US & Japan (-): DM equity funds (-0.1%,MFs: -0.1%, ETFs: +0.1%) saw outflows as both ETF & MF funds experiencedredemptions. With political risks rising in US, investors continued to move outof US equity funds in sizeable proportions (-0.2%, MFs: -0.1%, ETFs: -0.3%),while the picture of European strength supported European inflows for the eighthconsecutive week (+0.1%, MFs: -0.0%, ETFs: +0.5%). Japan funds suffered asecond week of consecutive losses on the back of a strengthening Yen (-0.4%,MFs: -0.7%, ETFs:-0.2%) .EM equity funds (+) with GEM (+) & Asia ex-J (+) vs. EMEA & LatAm (-): A softerUS dollar clubbed with