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Fund Flows Go Global

U.S. investors are getting more familiar with overseas equity.

According to recent data, investment in equity funds continues to flow into international stocks, while investment in U.S. equity is slowing.

At the same time, initial public offerings in foreign equity markets are rising at a faster clip than on U.S. exchanges.

The news comes as foreign equity market performance eclipses that of U.S. equities and fund managers encourage clients to move their money across the Atlantic.

"International equities in both developed and emerging markets has been outperforming the U.S., so that's driving increased U.S. investor interest in overseas equity," says Alec Young, equity market strategist at S&P equity research services. "It's not surprising at all to see money flows supporting non-U.S. equities."

In July, fund flows into world equity funds were $7.5 billion, compared to an outflow in U.S. equity funds of $2.4 billion, according to data in a Merrill Lynch research report on Wednesday. Year to date, nearly $106 billion has gone to world equity funds, compared with $38 billion invested in U.S. equity funds.

"It's just a judgment call that there is a slowing U.S. economy vs. the global economy having more momentum behind it," says Jay Suskind, head of institutional equity trading with Ryan Beck.

Over the past year, the FTSE 100, an index that tracks performance of the top 100 companies on the London Stock Exchange, is up around 11% for the year. Japan's Nikkei 225 is higher by nearly 28% for the year, and the Amsterdam Stock Exchange is up almost 19%. Meanwhile, the S&P 500 is up only 7% for the year.
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