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Investors return to risk, says Markit

02 April 2014

US benefits from reassessment of exposures

Read more: Markit short selling risk Simon Colvin

After a tenuous start to the year, investors have a renewed appetite for risk having returned to the trades favoured during the bull run of 2013, explains Markit research analyst Simon Colvin.

The last four weeks have seen US investors regain their appetite for their domestic market. The 388 US listed domestically exposed funds saw over $15.8bn of inflows in March, enabling these funds to more than recoup the $14bn of outflows experienced in the first couple of months of the year. Total AuM has reached an all-time high of $930bn.

"Driving these inflows was a return to the broad based index investments that were last year’s favourite play," said Colvin. "Size and style funds (which include tracker funds) made up the bulk of inflows accounting for $12.5bn of the March total, recouping some of the $22.4bn of funds lost during the first two months of the year."

Sector-focused funds continued to attract new assets with $2.66bn of inflows, the seventh month in a row that sector exposed funds saw net inflows.

"Short sellers are also showing signs of returning to last year’s risk on mode with the average short interest in the S&P 500 falling by nearly 3% to 2.2% after from the recent highs seen during the first week of March," added Colvin. "Driving this fall in demand to borrow are consumer discretionary constituents which have seen their average demand to borrow fall by 4% to 2.86% of shares outstanding."

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