Firstly, let us talk about what you think will really come out of Trump and Putin’s meeting in Alaska, because it seems like there could be some resolution to the war in Ukraine.
Cameron Brandt: Well, the war has been going on for so long and so much has been invested in it by multiple actors that hoping for a resolution within just a week or so is overly optimistic. That said, there is definitely some fatigue on the Russian side, and Trump taking a stronger line might encourage them to look for a solution.
In terms of market impact, however, from where we sit—watching big universal mutual fund and ETF flows—geopolitics has really not been a meaningful long-term driver of flows for quite some time. It will sometimes move the needle week to week, but partly because of the enormous post-Great Financial Crisis liquidity, investors have become conditioned to see geopolitical events as providing a short dip that they should buy into. So, I am not going to predict any enormous shifts, even if we get the best-case scenario next week.
So, what is going to drive the movement of flows? Amidst all the tariff negotiations, are you already seeing money move out of the US, and is that money being deployed into other emerging markets? Or do you think people are still in just a wait-and-watch mode?
Cameron Brandt: More wait-and-watch than redeploy. We are seeing a little bit of money move out of the US, and we are certainly seeing fund managers who have the option of reducing their exposure to the US—by this I mean global equity funds with a truly global mandate—they have certainly been trimming their exposure, but without a full-on rush to the exits. We are not seeing significant outflows from US funds. It has been more of a slow grind— a few billion here, a few billion there—and people are certainly on edge. But the moment there was some clarity on tariffs with the two key trading partners, the EU and Japan, there was definitely a pickup in flows back into dedicated US equity funds. I do think the tariff uncertainty is not helping, but as you mentioned before I joined you, US markets continue to move higher and the general market sentiment is that this too shall pass.
Also, help us understand a little more about these fund flows we have seen. While you say that flows out of the US have not been very significant, flows into the US are also not looking very attractive right now. But you have seen significant outflows from China, Taiwan, and other markets. Help us understand where these fund flows are actually going and where India stands amid all of this, because we have also seen consistent FII selling in India.
Cameron Brandt: To answer the first question: recently, funds have been moving into liquidity funds. Last week, US and Europe money market funds absorbed about a hundred billion dollars, so I think that at the moment is the main offramp for the money.
Regarding US flows, four, five, six billion dollars represent only 0.01% of the total AUM of the US equity funds we track, so we are seeing a trend away from US assets, but it is not a very strong one—certainly not yet. In terms of emerging markets, no, we are not seeing much of a rotation toward them. There was a little thaw coming into the third quarter, and there has been more interest on the emerging market debt side than on emerging markets equity.
Flows into dedicated India funds were recovering until the latest inflection point caused by higher tariffs due to India’s consumption of Russian oil. What is worrying people more, in many ways, are the pharmaceutical tariffs. India is a major provider of affordable pharmaceuticals to the US, and people are trying to make sense of what that might mean both for India and for US healthcare policy.
So, there is more uncertainty to navigate, but once that uncertainty goes away, I think you will see more money come back into the US, and India—which was doing quite well until this happened—will probably start to see things pick up as well.