LONDON- Money market funds and equities saw almost similar inflows, BofA’s latest fund flow statistics showed, in a puzzling investment trend amid rising concerns over a dialing back of stimulus by central banks.
With the US banking system swimming in nearly $4 trillion of reserves, a major chunk of that is likely to be flowing into money market funds, which are absorbing the flush of cash and finding fewer options for investing it.
Some $16 billion went into money market funds in the week to Wednesday, on top of the $68 billion the week before, BofA said citing EPFR data.
Flows into equities also occurred, albeit at a slower pace, BofA’s data crunching showed.
Equities attracted $14.7 billion led by banks and material stocks, which typically benefit from an inflationary environment.
That has helped Europe, which saw $2.3 billion in inflows.
Fund managers have been steadily shifting towards stocks that typically benefit from rising rates, growth and inflation, like banks and energy, which make up a big part of European stock indexes.
The slowdown in equity flows was mainly seen in tech-focused funds. Tech stocks are particularly sensitive to rising rate expectations because their value rests heavily on future earnings, which are discounted more deeply when rates rise. — Reuters
