5 December 2017
Weekly Fund Flows
Periodical
EuropeStrategy
Weekly Fund Flows
Date
5 December 2017
Deutsche Bank
Markets Research
Bond funds will win 2017
Last weekˉs (Wed-Wed) review of fundsˉ in/outows as % of fundsˉ AuM.
With only four weeks of 2017 remaining, bond funds will likely be this year's
inow winner, having seen ~$350 billion of inows year-to-date. This already
secures that, by the end of 2017, global bond funds will have seen the strongest
year on their record, taking the place of the $200 billion seen in 2014. This
compares to $280 billion of inows for global equity funds this year, which, while
also set for a new annual record themselves, will once again lose out on relative
terms. Since 2009, the low yield environment has resulted in a large allocation of
money into xed income, and every time the rate normalization got pushed out
further, bond funds kept gaining relative to equities (see Fig. 1). In fact, over the
past ten years, global equity funds have only once seen stronger annual ows than
bonds, when in 2013, the Fed's taper announcements resulted in brief but strong
bond fund redemptions. But the allocation gap between bonds and equities is
now back at its largest (thanks to last year's ight out of equity mandates), and we
think it will not meaningfully close anytime soon, as we believe that moves in the
US 10-year bond yield are explained rst and foremost by global PMI momentum,
which points to downside risks to yields over the coming months. Given the strong
determinant US bond yields are for the equity-to-bond rotation, our projection
suggests a trend reversal to only start in the second half of next year (see Fig. 2).
Figure 1: Since 2009, global bond funds have seem
much stronger inows than equities
Figure 2: Our PMI-implied view on bond yields suggests
the bond-to-equity rotation to get shifted into H2 2018
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
200920102011201220132014201520162017
Cumulative flows into global funds since 2009, in USD trillionBonds
Equities
Gap closing stronglyafter bond outflows post the
Fed taper announcements
Gap widening stronglyduringlast year's flight
out of equity mandates
-250
-200
-150
-100
-5050
100
150
200-300
-200
-100100
200
300
400
20052008201120142017
DM bond minus equity flows, in USDbn
US 10-year bond yield, in bps, inv., rhs
PMI implied US 10-year bond yield forecast
year-on-year change
In fa
vou
r of
bon
ds
In fa
vou
r of
equ
ities
Source: EPFR Global, Deutsche Bank calculationsSource:EPFR Global, Datastream, Haver, Deutsche Bank calculations
Andreas Bruckner
Strategist
+44-20-754-18171
Sebastian Raedler, PhD
Strategist
+44-20-754-18169
Wolf von Rotberg
Strategist
+44-20-754-52801
Tom Pearce, CFA
Strategist
+44-20-754-16568
Deutsche Bank AG/London
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