August 4, 2017

Despite the Dow’s New Heights, Investors Remain Focused on Nondomestic Equity Funds

by Tom Roseen

While investors generally continued to shun domestic equity funds (-$2.2 billion) during Thomson Reuters Lipper’s fund-flows week ended August 2, 2017, they remained enamored of nondomestic equity funds (+$2.1 billion), padding their coffers for 19 of the last 20 weeks.

Though mutual fund investors contributed to the nondomestic equity fund total this past week, injecting $633 million, they haven’t had the resolve of their ETF counterparts and have injected net new money in only 9 of the last 20 weeks. Interestingly, authorized participants (ETF investors) have injected net new money into nondomestic equity funds for 32 consecutive weeks, this past week making net investments to the tune of $1.4 billion.

This past week the primary attractors of APs’ nondomestic equity ETF net inflows were iShares Core MSCI Emerging Markets ETF (IEMG, +$571 million), iShares MSCI ACWI ETF (ACWI, +$230 million), and iShares Core MSCI Total International Stock ETF (IXUS, +$190 million).

Year to date through August 3, 2017, Lipper’s World Equity Funds macro-classification has returned an eye-popping 19.64%, with the India Region Funds classification (+32.70%) leading the pack, followed by China Region Funds (+28.23%), Pacific ex-Japan Funds (+27.14%), and Emerging Markets Funds (+23.49%). Although world equity funds have handily outpaced their U.S. diversified equity fund counterparts (+8.93%) year to date, select classifications in that group have posted very handsome returns as well, with Equity Leverage Funds returning 21.69%, Large-Cap Growth Funds gaining 18.98%, and Mid-Cap Core Funds rising 13.83%.

Domestic equity funds (including both conventional funds and ETFs) have witnessed $23.1 billion of net inflows year to date, with ETFs attracting some $63.8 billion, while their mutual fund counterparts handed back $40.7 billion. On the nondomestic fund side (+102.3 billion year to date), ETFs have taken in $80.4 billion, while their mutual fund counterparts have seen net inflows of $21.9 billion.

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