According to Morningstar’s European fund flow data, US equities saw a net €6.2bn in inflows in November, breaking the previous record set in October 2014 by more than €1bn. Most inflows went into large-cap blend funds, but value funds were also popular, seeing more than €1bn inflows. The bulk of these inflows flowed into active funds, which overall saw their first net inflows in more than a year in November. All thanks to president-elect Donald Trump, it seems.
In a strong sign that the tilt from growth towards value is really happening, US equity growth funds saw net outflows of almost €0.5bn despite the overall record inflows into US equities.
The fund flows figures confirm investment sentiment data from Expert Investor. When we asked European fund buyers in late November/early December about their asset allocation intentions, the share of fund buyers planning to increase their allocation to US equities over the following 12 months had increased in every European country bar Belgium, compared to September.
On a Pan-European level, net buying (those who say they plan to increase allocation minus those planning to decrease exposure) is at its highest level in three years (see chart). The figure confirms a trend that we spotted at several Expert Investor forums we held across Europe since the US elections. We asked delegates at these events which asset class would profit most from a Trump presidency: US equities came out on top on all these occasions.
November marked a strong reversal of European investors’ recent forays into emerging markets. After several months of very strong inflows, emerging market equities registered net outflows of €5.9bn over the month, while a net €7.1bn was taken out of emerging market bond funds.
According to the Institute of International Finance (IIF), the current EM outflows spell is the longest since it started measuring EM portfolio flows in 2005. It has now counted 36 consecutive days of net outflows since the US elections, bettering the previous record of 34 days which was set in the summer of 2007 as the global financial crisis started to unfold.