For all those data geeks out there like us, analyzing fund flow data can be an incredibly interesting and revealing exercise. So much so, that we devoted another blog to the topic. Regular readers might have caught last week’s blog in which we highlighted the massive divergence of YTD net flows between International Equity and U.S. Equity ($60.7 billion of inflows vs. -$58 billion of outflows, respectively, for mutual funds, both active and passive, through Q2). The data appeared to suggest that U.S. equity investors were diversifying their domestic exposure overseas. If that is true, then where is the money going? Where are investors seeing opportunity in the international markets?
To recap, International Equity has attracted over $60 billion of positive net inflows YTD across mutual funds, both active and passive, as of June 30, 2018; of that total, $17 billion came in during the second quarter bringing total AUM for the asset class to $2.5 trillion.
Judging from the table below, U.S. equity investors heavily favored Foreign Large Cap Blend and Foreign Large Cap Growth as they accounted for 77% of all flows. Emerging Markets came in third at $9.3 billion followed by World Small/Mid Cap Stocks at nearly $4 billion. At the opposite end, World Large Cap Stock and Foreign Large Cap Value suffered the greatest outflows as they lost over -$2.2 billion and -$1.3 billion, respectively. However, it is interesting to note that Foreign Large Cap Value did have a positive Q2 in which $249 million of net positive flows was recorded; appears investors are seeing opportunity in this beaten-down asset class.
International Equity Asset Flows
Data as of June 30, 2018
Source: Morningstar, Inc.
Interested in having our insights delivered directly to your inbox?
As international equity investors, the team at R Squared Capital Management (former team at Julius Baer / Artio Global) utilizes fundamental and macro analysis in our quest to correctly identify structural tailwinds and headwinds at the geographic, sector and company levels.
FROM THE DESK OF RICHARD PELL
Richard Pell is CEO and Portfolio Manager at R Squared Capital Management.
Richard co-founded R Squared Capital Management in May of 2013. Prior to that, he was Chief Executive Officer and Chief Investment Officer of Artio Global Management LLC, a position he held since 1995 when the firm was part of the Julius Baer Group. Richard also served on the Board of Directors at Artio.
To read Richard's full bio or other RSQ team members, click here.