One doesn't need to see the recent fund flows to know that the tech euphoria of the past seven months appears to be ending - one look at the recent underperformance of the Nasdaq is sufficient - but it helps. Several weeks ago we showed a chart demonstrating the furious inflows into tech stocks, which as BofA calculated, annualized at an 18% AUM growth rate in 2017, resulting in a 22% increase in the S&P tech index. .
And yet, despite strong tech EPS growth, which is on pace for its best print in 5 years at over 18%, largely thanks to offshore earnings...
... tech fund flows have slowed down sharply in recent months.
It's not just tech flows that are on the edge: as BofA's Michael Hartnett notes in his latest Flow Show, there has been "risk-off in fixed income" with inflows to Treasuries & IG, outflows from TIPS (biggest in 5 weeks) & HY; as well as the largest health care outflows in 6 months as US reform prospects diminish. Within fixed income, safe haven government and treasury bond funds attracted $200 million, the first in three weeks. But the lion's share went to investment grade corporate bonds, which pulled in $5.8 billion, and emerging market debt, which attracted $1.9 billion.
Meanwhile, investors have continued to avoid the United States, withdrawing $2.7 billion in a seventh straight week of outflows. By contrast, emerging markets attracted $2.2 billion, Europe $1.3 billion and Japan $800 million. On a YTD basis, inflows into the RoW are now $93 billion with capital headed to Europe/Japan/EM, while flows into the US have been flat. The breakdown:
- US: 7 straight weeks of outflows ($2.7bn)
- EM: 20 straight weeks of inflows ($2.2bn)
- Japan: inflows 7 of past 8 weeks ($0.8bn)
- Europe: inflows 18 of past 19 weeks ($1.3bn)
Which of course begs the question: if flows into US funds have been flat, and if buybacks are indeed declining, then who is buying?
In the weekly dose of bad news for the active managed commodity, while there was a net $2.3 billion of inflows into global equities, $6.8bn of this went into ETFs while $4.5bn was again in the form of outflows from mutual funds. And for the full year, outflows from Long Only funds have hit $64 billion, more than offset by the $261 billion in inflows into ETFs.
Finally, emerging market equities continued to top BofA's league table of cross-asset winners and losers, returning 26.2% in 201, while European equities are in second place, up over 20% in dollar terms, but far less in local currency terms.