Money poured into global equity funds as investors yanked allocations from global fixed income and emerging market strategies in the week following Donald Trump's victory in the U.S. election, according to data from financial intelligence firm EPFR Global.
As global equity funds pulled in over $27 billion for the week ended November 16, global bond funds lost two-thirds of that amount, making it the second largest weekly outflow since the data provider began to track the asset class's flows in the first quarter of 2002. Money market funds lost a further $14 billion for the week.
The key themes picked up by investors heading into a Trump presidency were clearly reflected in flows as U.S. equity investments were concentrated towards financial, healthcare and industrial sectors.
These speak to the widespread belief that the President-elect will seek to boost fiscal spend, cut red tape and encourage interest rates to resume an upward trajectory.
Within the report, EPFR Global Director of Research, Cameron Brandt said, "This week's flows are certainly consistent with the narrative that Trump's policies spell reflation in the US and a lighter regulatory burden for a number of sectors."
"They are also consistent with the assumption the benefits of a hotter U.S. economy will not flow as smoothly through trade channels to other countries and regions," he added.
Such regions include emerging markets whose hard and local currency funds saw the largest cash outflows on record and the highest as a percentage of assets under management (AUM) since the so-called "taper tantrum" during the second quarter of 2013.
Two emerging markets bucking the trend were Mexico and Russia.
Despite Trump's threats of building a wall between the U.S. and Mexico to stem north-bound migration and of watering down NAFTA (the U.S. free trade agreement with Mexico and Canada), Mexican equity funds pulled in more than $250 million for the second week in a row. This as the market was perceived as oversold with anticipation growing that spillover from any boost to the U.S. economy from a Trump presidency could offset newly erected trade barriers.
Flows into Russian equity funds bounced to an 87-week high as optimism over the future of the relationship between the world's largest country and the U.S. rebounded given Trump's open attitude towards Russian President Putin during and since the Presidential campaign.
This as Russia's economy appears to be turning a corner; business confidence in the country is growing and expectations are rising that the European Union (EU) might not be able to maintain a united front on punitive sanctions.
While high-yield bond flows suffered $3 billion of redemptions and municipal bond funds recorded their biggest outflows in over three years, floating rate and inflation protected bond products attracted strong inflows. Bank Loan funds rebounded while inflation-protected bond funds secured an additional $500 million for the sixth time in the past seven weeks to add one more week to their longest straight run of inflows since the first half of 2011.
Equity sectors going against the overall grain were real estate and consumer goods, the former expected to be hit by the anticipated rise in interest rates and the latter by expectations for more subdued wage growth than under a Hillary Clinton presidency.
The exuberance seen in equity markets was reflected in a survey carried out by alternative assets data provider Preqin following the election, in which 53 percent of managers said they believed the new administration would be positive for hedge funds and private capital funds.
They pointed to bumps from expectations for increased fiscal spend and cuts to corporation tax as key reasons for their optimism although they broadly viewed dilution of free trade treaties as a potential negative.
Only 12 percent of the 182 alternative asset managers surveyed expect Trump's presidency to have a negative effect on the industry.