Equity inflows highest since 2007

Equity funds have this week seen the strongest inflows for more than five years as global shares surged and a compromise deal on the US fiscal cliff boosted investor confidence.

Net inflows into equity funds monitored by data provider EPFR hit $22.2 billion (€16.62 billion) in the week to January 9th – the highest since September 2007 and the second highest since comparable data began in 1996. Emerging market and world funds, which had record inflows, drove much of the expansion.

The figures came at the end of a week in which global equity indices hit multi-year highs and will encourage speculation about a “great rotation” this year out of safe assets such as government bonds and into equity markets. “It has certainly got something of that look about it,” said EPFR research director Cameron Brandt.

“It is broadly based with strong flows into equities from retail investors and into actively managed funds. It has a different feel to it than other recent spikes in flows into equities.”

US stocks climbed to a five-year high on Thursday and the FTSE 100 in London was trading at its highest levels since before Lehman Brothers’ collapse. The record inflows into equities in September 2007 followed aggressive interest rate cuts by the US Federal Reserve in at attempt to head off the effects of the then-erupting global credit crunch – but was followed a year later by the collapse of Lehman Brothers.

Scepticism remains about whether the latest shift into equities will be sustained, however. “There are some small signs of this on the retail side, but we haven’t seen much so far,” said Jim Stride of Axa Investment Managers. “It’s a bull dream so far, not reality.”

EPFR’s latest weekly figures showed a net $7.4 billion inflow into emerging market equity funds. Inflows into US equity funds, at $10.4 billion, were at a six-week high. Europe equity inflows were more modest, at less than $1 billion. – (Copyright The Financial Times Limited 2013 )