Last week’s (Wed-Wed) review of funds’ in/outflows as % of funds’ AuM.

　　While the disappointing US nonfarm payrolls for May dominated the first halfof last week, abruptly ending the one-week reprieve for US equity fund flows, itwas Fed chair Yellen’s dovish commentary which ultimately set the tone forrisky assets overall. Post Yellen’s speech high-yield bond funds snapped a fiveweekoutflow streak with weekly commitments hitting an 11-week high, whileEM equity funds posted consecutive weekly inflows for the first time sinceApril. EM debt fund flows jumped back into positive territory – propped up byrising oil prices and a weaker dollar – and have seen inflows in 14 of the past16 weeks. Wednesday’s FOMC meeting, which will feature new Fedprojections, should give clues on whether EM funds inflows are sustainable.

　　With less than two weeks ahead of the UK’s EU referendum, opinion pollmomentum has recently moved in favour of the ‘Leave’ camp. As a result theheightened uncertainty helped revive an otherwise ebbing fund flow rout inEuropean equity funds, which have now been waiting for inflows for 18 weeks– despite economic surprises for the Euro-area turning positive for the first timesince January (see top right chart). Consequently UK equity funds recordedtheir seventh straight weekly outflow, yet on a slowing redemption rate. Withthe continuous shift towards ‘Leave’, investor’s will most likely shy away fromUK and European equity funds for at least another week. And given the eventrisks ahead, it came as no surprise that last week the non-committal moneymarkets gained their largest inflows since mid-February.

　　Across asset classes – bonds (+) & MM (+) versus equities (~): Total equityfunds (-0.0%, MFs: -0.1%, ETFs: +0.2%) were marginally negative owing tooutflows from DM equity funds (-0.1%) and only partially offset by inflows intoEM equities (+0.1%). Total bond funds saw significant inflows (+0.2%; highestsince Apr’16) driven by inflows into credit (+0.5%) and EM debt funds (+0.1%).

　　Meanwhile MM funds (+0.4%) experienced strong inflows (highest sinceMar’16), more than compensating for the previous week’s heavy outflowsDM equity funds (-) – US, Europe (-), and in part Japan (~/-): It was yet anothersubdued week for DM equity funds (-0.1%, MFs: -0.1%, ETFs: +0.1%) withlosses in the US (-0.1%, MFs: -0.2%, ETFs: +0.1%) and Western Europe (-0.2%,MFs: -0.2%, ETFs: -0.2%). Japanese funds saw assets decline only marginally,but after previous week’s gains, Abe's decision to postpone a planned tax hikefailed to spark a more permanent uplift (-0.0%, MFs: +0.1%, ETFs: -0.1%).

　　EM equity funds (-) – GEM(+) vs Asia ex Jap (-) , EMEA (-) & LatAm(-}: Risingoil prices and a weaker dollar dispensed a nice dose of inflows into EM equityfunds (+0.1%, MFs: -0.1%, ETFs: +0.6%) driven by a strong positive sentimenttowards GEM funds in general (+0.3%) but contrary to losses seen across theregional mandates in EMEA (-0.0%, MFs: -0.1%, ETFs: +0.3%), LatAm (-0.3%,MFs: +0.1%, ETFs: -0.1%), and Asia ex-J (-0.0%, MFs: -0.2%, ETFs: +0.2%).

　　Bond funds (+) with credit & EM bonds (+) vs sov bonds (-): Total bond funds(+0.2%) experienced significant inflows for the 10th consecutive week butthere was a change in leadership compared to the previous week, as high-yieldfunds sprung back into action (+0.6%). EM debt funds (+0.2%) continued theirpositive run for the second week with DM counterparts also gaining (+0.2%).