Global Investing

Banks lead the equity sector flows

September 23, 2013

Banks and financials stocks have had a pretty good year. The Thomson Reuters Global Financials index is up by more than 20% in the last 12 months, and although the detritus of the financial crisis still offers the occasional sting, investors are starting to see brighter spots for the industry.

That confidence is increasingly obvious in the fund flows.

Our corporate cousins at Lipper track more than 7,000 mutual funds and ETFs which are dedicated to specific industry sectors. Dig a little into the data in this subset of funds, and you start to get a pretty good picture of where the biggest bets have been placed.

Just shy of 500 of these funds are focused entirely on banks & financials. Together they hold more than $46 billion in assets.

Last month, they suffered a total net outflow of just about $1 billion, but on a one-year view, 10 months of net inflows have driven an injection of over $10 billion. It amounts to a concerted bet on the sector, particularly in the U.S. where the bulk of assets are held, with the inflows equating to 22% of the latest published assets under management. You can see the evolution over the year in the chart below; cumulative gains or losses over the 12 months are shown in the blue area; monthly flows are shown by the red bars.

The sector was by far the most popular, both in absolute terms and relative to the assets held.

Cyclical consumer goods and services funds (chart below) managed a net inflow equivalent to about 18 % of their latest published assets over the 12 months, while biotech funds and pharma/healthcare funds were at 15% and 10% respectively. Pharma/healthcare was in second spot in absolute terms, with a 12 month net inflow of $7.8 billion, while global real estate (chart below) was third with $5.6 billion.

Worth noting too that the global real estate sector was the most consistent over the year, pulling in overall net inflows in 11 out of the 12 months, according to Lipper’s estimates.

Get in touch with me directly at joel.dimmock@thomsonreuters.com or on Twitter if you’re interested in seeing the full data.

Outside the big ticket numbers, there’s a tale to tell among the information technology funds.

Over 12 months, they have only managed net inflows equivalent to 1.6 % of assets – well below the average for all 20 sectors, according to the Lipper estimates, but the last four months have been marked by a resurgence. The funds posted overall net inflows of more than $1.2 billion in both May and July – the biggest monthly results since the beginning of 2011 and a turnaround which hauled the sector back into the black for the year. Check out the chart below.

Of course, equities are enjoying a long summer and a rising tide lifts all boats – or at least it tries to. Some sectors are still under water, and telecoms services equity funds take the wooden spoon, posting net outflows over the 12 months equal to 13% of assets and suffering 10 down months in the process.

And finally, it will surprise no one that gold and precious metals equity funds have seen one of the sharpest reversals, but it’s noticeable that it pivoted on a $1.4 billion net outflow in January as investors, pretty successfully it seems, anticipated an about 20% fall in the gold price since then.

 

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