Equity Flows Approach Record Levels as Confidence Returns

(January 11, 2013) — Investors have plunged back into equities with flows reaching almost record levels in the first week of the year, showing renewed confidence in the global economy, market participants have said.

In the first full week of trading, US equity mutual funds saw massive inflows, according to data monitor Lipper.

A note from Lipper’s Director of Research Services Tom Roseen said: “Equity funds, including exchange-traded funds (ETFs), took in a whopping $18.3 billion for the week ended Wednesday, January 9, their fourth largest net inflows since Lipper began calculating weekly flows in January 1992.”

Roseen noted that on Friday, January 4, investors catapulted the S&P 500 index to its highest close since December 31, 2007, after the US Congress passed budget legislation that raised taxes on the wealthiest Americans and extended unemployment benefits-delaying the spending-cut fight until the debt debate occurs in a few weeks.

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More widely, so far this week the trend has continued, according to data monitor EPFR. It showed that $6.8 billion was moved into equity funds, widening the gap over flows into fixed income funds, which have stayed relatively stable.

Kevin Murphy, equities fund manager at Schroders, told aiCIO: “The significant flows into bonds since 2008 has pushed yields down to a level that many investors feel offer insufficient compensation for the risks of inflation. As such, investors are beginning to look to equities as they offer greater potential upside, whilst also offering inflation protection. With equities having suffered many years of outflows, the move at the beginning of this year is an encouraging start.”

A note from investment bank UBS showed that over the last couple of months investors in the US had begun reversing a trend of selling equities in favour of buying bond funds, with the largest outflows coming from high yield products.

Bank of America Merrill Lynch’s equity strategy team said over the past week, 17 of the top 20 ‘winners’ were country-based equity funds. These funds posted total returns of between 1.3% and 3.2%. The three bond ‘winners’ were Greek, Korean and Mexican government debt.

(January 11, 2013) — The largest pension fund in the United Kingdom has appointed a trustee director with a career in investment banking to its board.

Catherine Claydon, who has more than 15 years’ experience at Goldman Sachs, has joined the pension fund, according to documents filed at the UK corporate register Companies House. A spokesman for the fund confirmed the appointment to aiCIO.

Claydon was a managing director of the bank’s pension advisory team, before leaving to join Lehman Brothers’ in a similar role in at the start of 2007.

After the collapse of the bank, she launched Claydon Advisers and has since taken several directorships at UK pension funds and listed companies. Claydon has been a member of the Unilever pension fund investment committee for almost three years and has been an independent trustee director at the Barclays pension fund since May 2011. She earned an MBA from Wharton Business School in Pennsylvania.

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The £38 billion BT pension fund, the largest in the UK, has eight trustee directors. It already has one independent trustee from Law Debenture – David Felder – who joined in September 2011. Claydon replaces David Barford who died last year.

BT has been one of the most prominent funds in the push towards investing in real assets. Last year it joined other large UK pensions that had committed to fund long-term infrastructure projects. The fund was nominated for recognition at aiCIO‘s Innovation Awards in December last year.

In November, BT reported its pension fund liabilities had increased to £42 billion, despite cash injections of £2 billion in the third quarter of the year. A £500 million rise in asset values could not offset an increase in liabilities, the company’s financial statements said.