We’re at risk of labouring this point, but there has been some more evidence that this year’s equity rally has not been spurred by a shift away from fixed income. The latest data from our corporate cousins at Lipper offer pretty definitive proof that there has been no Great Rotation, at least not from bonds to stocks.
Worldwide mutual fund flows numbers for February showed an overall move into equity funds of more than $22 billion, and a net flow to bond funds of about half that. Over 3 months it’s a similar story, with a net inflow to equities of about $84 billion while bond funds sit close behind at about $75 billion. Little wonder then that there is some evidence at least of movements out of money market funds.
In fact, maybe HSBC called it about right last week. In a note, their cross-asset strategists reckoned a pick-up in economic growth might support a ‘minor’ cyclical rotation into equities from bonds, but a longer-term structural shift between the two asset classes as part of a ‘Great Rotation’ was less likely.
You can play around with the full interactive graphic by clicking on the image below. If you have any problems, the link is here: http://r.reuters.com/ryk34t
There are a few caveats to note: these data don’t include private institutional mandates and are an extrapolation from publicly-available performance and assets-under-management figures. Also, for ease of use, it’s all in dollars; do your own maths as you go.
There are some other useful nuggets to pull from the data, not least the total failure to sustain the surge in U.S. equity inflows that hit the headlines in January. The three month numbers to end-Feb show net outflows to funds in Lipper’s U.S. equity category at more than $18 billion, while Global emerging markets funds boast the top net inflow, at close to $30 billion.
Looking at bond funds in February alone, the stand out stat looks like a move away from corporates. Euro-denominated corporate debt funds showed the largest net outflow for the month at $1.7 billion (it’s 1.4 billion in euros), but GBP corporates and global corporates are also in the top 10.
COMPETITION TIME: One last intriguing thing to note: Only four of Lipper’s equity sectors show a negative return over the three months to end-Feb. If you can guess all of them before opening up the interactive graphic, award yourself £10, redeemable at all branches of Jessops.