asset allocation & delta-1 strategy investor positioning ... · investor positioning and flows...

22 February 2019

Investor Positioning and Flows

Strategy Update

North America Asset Allocation & Delta-1 Strategy

Investor Positioningand Flows

Date22 February 2019

Deutsche BankResearch

The Beneficiaries Of Money MarketFund OutflowsMoney market funds saw large outflows this week and history suggests there isplenty more to come with equities and credit the likely beneficiaries

■ Money market funds saw large outflows this week (-$19bn), in line withhistorical behavior which sees strong seasonal outflows beginning at thistime of the year and typically lasting till late summer. As we noted lastweek, the outflows from MM funds can potentially be quite large ($175bn)( Outflows From Money Market Funds Set To Begin, Feb 15 2019 ).

■ In the past, these periods saw increased inflows into both equity andcredit funds. Within equities, US funds did not see much in terms ofinflows while the rest of the world typically benefited. Within bonds, flowswent predominantly into credit funds (IG, HY and EM) while governmentbond funds saw small outflows.

■ From a performance perspective, equities and credit saw consistentlystrong returns in these periods. Interestingly, although US equities did notreceive much inflows, the S&P 500 (+10%) rallied strongly on average, asdid the Stoxx 600 (+10%), Nikkei (+8.7%) and EM (7.5%). Credit spreadstightened for IG (-9bps) and significantly so for HY (-41bps) and EM(-62bps). Changes in 10y bond yields were mixed, with the median at zero.

■ While the market was clearly oversold relative to earnings and economicgrowth at the December bottom and through the last few weeks, withthe rally continuing to grind higher, it has now caught back up. We wouldhowever note that potential inflows into equities, as discussed above, andcontinued buybacks could see the market move higher still.

Equity funds see large outflows overall, low vol continues to be a big winner Equities (-$12.7bn) overall saw large outflows this week with every region suffering. US (-$4.3bn) and Europe (-$3.9bn) continued to see large outflows while EM (-$0.5bn) and Japan (-$1.1bn) which had both seen steady inflows since October also saw outflows this week. Despite the stock market rally, equity flows this year have continued to move towards defensive funds while cyclical sectors such as Financials, Tech, Energy and Materials see outflows. Within defensive funds, low vol funds have been the big winners so far with large steady inflows since September. Unlike in past episodes such as in 2016, other funds tracking Utilities, Consumer Staples, dividend funds and REITs have not received much in terms of inflows this time.

Parag Thatte

Strategist

+1-212-250-6605

Hallie Martin

Strategist

+1-212-250-7994

Srineel Jalagani, CFA

Strategist

+1-212-250-4509

Binky Chadha

Chief Strategist

+1-212-250-4776

Deutsche Bank Securities Inc.

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should considerthis report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONSARE LOCATED IN APPENDIX 1. MCI (P) 091/04/2018.

Distributed on: 23/02/2019 00:39:12 GMT

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22 February 2019


EM equity funds (-$0.5bn) saw their first outflow since mid-October this week,albeit a small one. The string of inflows earlier was at odds with data surpriseswhich continue to be quite weak. The outflow this week reflects those fromdedicated country and regional funds while broad GEM funds saw inflows butat a sharply reduced pace. Outflows from EM mutual funds also resumed after a6 week break while flows into ETFs continued but at a slower pace. EM bonds,after several weeks of strong inflows, also saw flows pause this week reflectingoutflows from local currency bonds while hard currency funds continued to seeinflows but at a slower pace. In our estimate EM equity futures long positionshave continued to move higher to record highs.

Systematic strategies continue to buy equities as the market moves higher■ Vol Control is near full equity allocations, so risk is to the downside.

Vol Control continued to add to equity allocations this week as both VIXand realized volatility metrics continued to decline. VIX dropped below14 today for the first time since the initial volatility spike in October. And1M realized dropped very quickly from 12.4 last week to 10.2 today. VolControl fund only have another $15-$20bn to buy before returning tofull equity allocations. If volatility spikes significantly for any reason, VolControl would sell quickly re-enforcing a sell-off.

■ Risk Parity is currently a tailwind for equities, as managers continueto re-risk across asset classes. Risk Parity managers move more slowlythan the other systematic strategies. And we believe Risk Parity hassignificantly more buying to do if volatility remains low and the marketenvironment remains constructive.

■ CTAs continue to flip long S&P 500 and other equity indices. The S&P500 has moved firmly through its 200d MA and short-term MAs continueto converge with long-term MAs triggering CTAs to buy. At the beginningof the year, most CTA were short equities globally. CTAs are now net longS&P 500 and also started to flip long other equity indices including Euro-Stoxx 50, FTSE 100, HSI, and KOSPI. We expect to see more buying ofequities from CTAs in the nest week or two if the market doesn’t sell-offsignificantly.

Hedge Fund 13Fs show shift from EPS Growth but still high beta to GDPGrowthHedge Fund 13Fs filings and single-stock short interest data show that theaggregate long-short Hedge Fund portfolio shifted away from both EPS Growthand Momentum over Q4, continuing trends that began in late 2017. Interestingly,Hedge Funds did not tilt their portfolios away from GDP Growth or ConsumerConfidence, which at least partially explains poor Hedge Fund performance in Q4and strong returns YTD as the market re-priced macro economic risk.

CFTC data for Feb 5th: EM equity longs at record high, addition of S&P 500shortsIn the first week of February, bond shorts rose again after falling steadily sinceOctober. Dollar longs edged slightly lower mostly on paring of CAD shorts. Withincommodities, oil net longs were mostly flat as gross longs rose but so did theshorts, while copper net shorts fell sharply and gold longs rose. Net EM equitylong positions, which began rising at the end of October, continued rising to newrecord highs in contract terms. Net S&P 500 positioning dropped the most sinceearly 2018, driven almost entirely by new shorts from both Asset Managers andLeveraged Funds.


EM flows take a breather


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Potential for large outflows from money market funds

Figure 1: Seasonal pattern suggests money market funds should seestrong outflows

Figure 2: Flows across asset classes

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Cumulative MM fund flows since 2011 ($bn)

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Cross asset flows (Cumulative since Jan 2017, $bn) DM equity

MM funds

EM equity

Govt bonds

Corp HG

EM bonds

Corp HY

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver, EPFR Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver, EPFR

Equity flows

Figure 3: EM and Japan the big beneficiaries of equity flows recently Figure 4: Low volatility have seen large steady inflows since September

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Cumulative equity flows since Jan 2017

(monthly, $bn)

US Europe

Japan EM equity

International*

*Funds with a global mandate, overwhelmingly tend to be focused on DM ex-US

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18

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9

Defensive equity fund flows by type

(cum, weekly, $bn)

Utilities REITs

Dividend funds Cons Staples

Low Vol

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver, EPFR Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver, EPFR

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22 February 2019


The beneficiaries of money market fund outflows

Figure 5: Flows across asset classes in periods when money markets see outflowsEquity ($bn) Bonds ($bn)

Date MM All Equity US Europe Japan

EM

Equity Global All Bonds

Govt

Bonds Corp HG Corp HY

EM

Bonds

2012 -137.3 4.4 -22.2 -15.5 6.5 25.7 9.2 224.3 -10.0 28.7 46.7 31.7

2013 -205.7 174.2 80.2 21.8 39.2 -13.7 51.8 11.5 -13.7 -11.7 11.2 -7.3

2014 -156.6 73.2 7.3 33.2 9.8 -8.9 32.6 108.0 0.8 19.1 9.4 3.1

2015 -134.5 17.8 -99.5 64.9 27.3 -16.2 38.3 87.2 -5.7 17.3 10.8 3.3

2016 -178.9 -90.3 -34.5 -93.1 -1.9 19.9 18.3 180.3 -23.1 52.6 18.2 40.9

2017 -111.9 179.4 -1.9 26.3 24.3 38.7 86.1 216.3 -1.0 48.3 3.6 41.8

2018 -97.4 52.1 29.6 -50.3 25.5 5.9 41.2 25.7 28.6 -7.8 -37.1 -14.9

2019

Median -137.3 52.1 -1.9 21.8 24.3 5.9 38.3 108.0 -5.7 19.1 10.8 3.3

Note: Periods when money markets see outflows from early in the year to late summer

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver, EPFR

Figure 6: Performance across asset classes in periods when money markets see outflows

Year S&P 500

STOXX

600

Nikkei

225

MSCI

EM World US 10y HG HY EM

2012 11.1% 14.6% 7.9% 7.5% 8.1% -21.36 -55.0 -66.3 -140.3

2013 19.8% 16.8% 38.9% -1.7% 14.9% 80.65 -3.9 -5.2 71.7

2014 7.9% 2.4% -0.2% 12.4% 4.7% -30.87 -8.8 22.2 -62.4

2015 3.2% 5.9% 18.7% 0.8% 3.1% 55.02 7.4 -58.4 -67.5

2016 12.7% 10.0% 8.7% 26.3% 11.2% -0.52 -79.9 -329.0 -135.7

2017 10.1% 19.0% 3.2% 23.4% 10.4% -16.94 -22.5 -41.5 -33.2

2018 9.8% -2.3% 10.5% -10.4% 3.6% 22.67 17.5 -14.9 83.4

2019

Median 10.1% 10.0% 8.7% 7.5% 8.1% -0.52 -8.8 -41.5 -62.4

Note: Periods when money markets see outflows from early in the year to late summer

Equity Bonds (bps)

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver, EPFR



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Equity pricing has caught up to growth

Figure 7: S&P 500 pricing in current earnings growth Figure 8: Market no longer pricing in a recession or sharp slowdown

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Recession S&P 500 ratio to 1y ma (lhs) S&P 500 EPS yoy ex-tax cut (rhs)

Correlation (1995-2017): 54%

Pricing at start of

earnings season and

December low

Our model

implied

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100 on 12/31/2018

S&P 500 ratio to its 200d ma (lhs) US Markit Mfg PMI (rhs) 50 line

Correlation (since 1997): 56%

*US PMI uses changes in ISM data to go before Sep 2007 and Markit data after that

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Haver, Factset, Bloomberg Finance LP Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Markit, ISM, Haver

Hedge Fund 13Fs & Single-Stock Short Interest - Aggregate L/S Portfolio

Figure 9: Hedge Funds continued to cut exposure to EPS Growth andMomentum in Q4

Figure 10: Hedge Funds did not cut beta to GDP Growth or ConsumerConfidence in Q4

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Beta to GDP Growth (lhs) Beta to Consumer Confidence (rhs)

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Axioma. Data as of 31-Dec-18. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Axioma. Data as of 31-Dec-18.

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vFLARE: Volatility-Sensitive Systematic Strategies

Figure 11: Risk Parity will likely be buyers of equities in coming weeks ifvolatility doesn't spike

Figure 12:Vol Control would need vol metrics to drop through 10-12% tofully re-allocate

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 20-Feb-19 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 20-Feb-19

Figure 13: CTAs are long US Treasuries and increasingly long S&P 500 Figure 14: In aggregate, CTAs are net long S&P 500 with more to switchif uptrend continues

Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 20-Feb-19 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, SEC filings, Bloomberg Finance LP, Data as of 20-Feb-19

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S&P 500 futures volumes remain light relative to Q4'18 and on-screen liquidity remains low

Figure 15: Equity futures positioning is typically correlated with pricemoves

Figure 16: Repo (implied financing) has not moved significantly with theYTD rally

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Aggregated US equity futures positions* (% of OI)

Asset mgrs + Lev funds (lhs) S&P 500 relative to its 200d ma (rhs)

Net long futures positions in S&P 500, NASDAQ 100, DJIA, S&P 400 and R2K. Positioning data as

of 05 Feb 2019

US downgrade, European

fin crisis

China deval, global

growth scare

Brexit

vote

-1.4%

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Jan

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$140

S&P 500 Non-Dealer Net Futures ($bn, RHS) 3M Repo

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 21-Feb-19. Source:Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC. Data as of 5-Feb-19.

Figure 17: Order book depth for ES1 futures is recovering but is still verylow

Figure 18: US equity futures volumes remain low YTD vs Q4'18

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Average daily ES1 Bid/Ask contracts size

$-

$100

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1-O

ct-

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US Equity Futures Volumes

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy. Data as of 21-Feb-19. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 22-Feb-19.

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Cross-Asset Futures Positioning and Flows

Figure 19: Investor positioning in cross asset futures as of February 5th

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19.

Figure 20: Week-over-week changes reflect Janurary 29th to February 5th data

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19

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Futures Positioning: US Equities, USD, WTI Oil, & 10Y Treasuries

Figure 21: S&P 500 futures positioning Figure 22: Dollar futures positioning

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19

Figure 23: Oil futures positioning Figure 24: Treasury futures positioning

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19.

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Futures Positioning: US Equities

Figure 25: Leveraged Funds and Asset Managers futures positioning Figure 26: Aggregate futures positions and shorts in single stocks andETFs

-3.5%

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Net longs in futures minus shorts in cash equities (% of SPX mcap, rhs)

Note: Futures net longs minus single stock and ETF shorts. Shorts data as of Jan 31, S&P futures Feb 05

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP.

Figure 27: US equity futures positioning - 1Y Percentile Ranks Figure 28: US equity futures WoW Change - 1Y Z-score

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Bloomberg Finance LP, Data as of 05-Feb-19.

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Equity L/S Hedge Funds returns are +5% YTD but Gross Leverage remains low

Figure 29: Hedge Fund's top $-longs continue to outperform top $-shorts YTD

Figure 30:Equity L/S Hedge Funds posted positive returns MTD,although smaller than January

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Feb-0

0

Feb-0

1

Feb-0

2

Feb-0

3

Feb-0

4

Feb-0

5

Feb-0

6

Feb-0

7

Feb-0

8

Feb-0

9

Feb-1

0

Feb-1

1

Feb-1

2

Feb-1

3

Feb-1

4

Feb-1

5

Feb-1

6

Feb-1

7

Feb-1

8

Feb-1

9

Month

ly R

etu

rns (

%)

Equity Long-Short Hedge Funds

HFRXEH

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Bloomberg Finance LP, Factset, Axioma. Data as of 21-Feb-19. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Bloomberg Finance LP. Data as of 20-Feb-19.

Figure 31: Gross Leverage for L/S Equity Hedge Funds is still lowrelative to history

Figure 32: Net Exposure of Equity L/S Hedge Funds is near 12M highs

Source: Deutsche Bank Global Prime Finance, Reuters. Data as of 18-Feb-19. Source: Deutsche Bank Global Prime Finance, Reuters. Data as of 18-Feb-19. Net Bias is Net Exposure/Gross Exposure.

22

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ETFs: Volumes and Flows

Figure 33: Stock and ETF volumes have been relatively light in February Figure 34: ETF participation in cash trading volumes was at YTD lowsthis week

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 21-Feb-19 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 21-Feb-19.

Figure 35: Equity ETFs got inflows, Fixed Income ETFs got outflows thisweek

Figure 36: US Equity ETFs saw inflows this week to asset allocation &liquidity products

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 21-Feb-19. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Factset, Reuters, Bloomberg Finance LP, Data as of 21-Feb-19.

22

Febru

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19

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and

Flows


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Equity Premia: Except Momentum, most long-short factors rallied with the market

Figure 37: US Fast Factors: Momentum stopped sliding and Growthrallied YTD

Figure 38: Europe Fast Factors: Residual Volatility has rallied sharplyYTD

Source:Deutsche Bank Quantitative & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 21-Feb-19 Source:Deutsche Bank Quantitative & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 21-Feb-19

Figure 39: Market has re-priced recession risk YTD as shown by ourmacro-cycle baskets

Figure 40: Asset Managers, M&A Targets, Energy outperformed thisweek

1.9%

2.5%

1.9%

1.3%

0.6%

3.0%

1.2%

-0.8%

-1.7%

-1.1%

-3.9%

(2.5) (2.0) (1.5) (1.0) (0.5) - 0.5 1.0 1.5 2.0

Materials/S&P 500

Financials/QQQ

Infrastructure/S&P 500

Financials/S&P 500

Value Fast Factor

Goldminers/Gold

Value/Growth ETFs

Buyback Alpha/S&P 500

Consumer Finance/Financials

QQQ/S&P 500

Oil Beta/Oil Prices

Healthcare/S&P 500

Airlines/Industrials

Standard Deviation

Thurs-Thurs Return

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy. Haver Analytics, Bloomberg Finance LP. Data as of 21-Feb-19. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Axioma, Factset, Bloomberg Finance LP, Data as of 21-Feb-19

22

Febru

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19

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S&P 500 Options: Open Interest, Vol, Skew, Correlation

Figure 41: SPY put options were more active than calls this week Figure 42: Put-call ratio for S&P 500 increased significantly from recentlows

Source: Deutsche Bank Quant & Delta-1 Strategy, OptionMetrics, Bloomberg Finance LP. Data as of 21-Feb-19. Source: Deutsche Bank Quant & Delta-1 Strategy, OptionMetrics, Bloomberg Finance LP. Data as of 21-Feb-19

Figure 43: 1M realized correlation dropped with volatility on earningsdispersion

Figure 44: Implied volatility has come in significantly, and skew droppedpost-Fed

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Bloomberg Finance LP, Reuters. Data as of 21-Feb-19. Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, Bloomberg Finance LP, Reuters. Data as of 21-Feb-19.

22

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Cross-asset flows

Figure 45: Flows across asset classes last 4 weeks Figure 46: Flows across asset classes cumulative since 2017

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

0.9

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

0.9

All Equity All Bonds MM

Fund Flows (last 4 weeks, % of assets)

30-Jan 6-Feb

13-Feb 20-Feb

-100

0

100

200

300

400

500

600

700

-100

0

100

200

300

400

500

600

700

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

Mar-

19

Cumulative flows since Jan 2017 ($bn)

Equity

Bonds

MM funds

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, Haver Analytics, Data as of 20-Feb-19 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, EPFR, Haver Analytics, Data as of 20-Feb-19

Figure 47: Cross asset flows last 4 weeks Figure 48: Cross asset flows cumulative since 2017

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

0.9

1.1

-0.7

-0.5

-0.3

-0.1

0.1

0.3

0.5

0.7

0.9

1.1

MM Govt

Bonds

Corp

HG

EM

Bonds

Corp

HY

Bal

Funds

Div

Funds

DM

Equity

EM

Equity

Cross asset flows as a % of assets (last 4 weeks)

30-Jan 6-Feb

13-Feb 20-Feb

Safer Riskier-150

-50

50

150

250

350

-150

-50

50

150

250

350

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

Mar-

19

Cross asset flows (Cumulative since Jan 2017, $bn)

DM equity

MM funds

EM equity

Govt bonds

Corp HG

EM bonds

Dividend

fundsBalanced

fundsCorp HY


22

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Equity Flows

Figure 49: Regional equity fund flows last 4 weeks Figure 50: Equity flows across region

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

All

Eq

uity

US

Euro

pe

Jap

an

Lata

m

Asia

ex J

p

EM

EA

EM

Glo

bal

Regional equity flows (last 4 weeks,% of assets)

30-Jan 6-Feb

13-Feb 20-Feb

-200

-150

-100

-50

0

50

100

150

200

250

300

-200

-150

-100

-50

0

50

100

150

200

250

300

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

Mar-

19

Cumulative equity flows since Jan 2017

(monthly, $bn)

US Europe

Japan EM equity

International*

*Funds with a global mandate, overwhelmingly tend to be focused on DM ex-US


Figure 51: Equity flows by fund style last 4 weeks Figure 52: Equity flows by fund style

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

Growth Value Blend

Equity fund flows (last 4 weeks,% of assets)

30-Jan 6-Feb 13-Feb 20-Feb

-150

-100

-50

0

50

100

150

-150

-100

-50

0

50

100

150

Dec-1

6

Mar-

17

Ju

n-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

Mar-

19

Cumulative equity flows since Jan 2017 ($bn)Growth Value Blend


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Figure 53: Equity fund flows by size last 4 weeks Figure 54: Equity fund flows by size

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

Large cap Mid cap Small cap

Equity fund flows (last 4 weeks,% of assets)

30-Jan 6-Feb

13-Feb 20-Feb

-75

-50

-25

0

25

-75

-50

-25

0

25

Dec-1

6

Mar-

17

Ju

n-1

7

Sep

-17

Dec-1

7

Mar-

18

Ju

n-1

8

Sep

-18

Dec-1

8

Mar-

19

Cumulative equity flows since Jan 2017 ($bn)Large cap Mid cap Small cap


Figure 55: Sector fund flows last 4 weeks Figure 56: Sector fund flows

-1.0

-0.6

-0.2

0.2

0.6

1.0

1.4

1.8

2.2

-1.0

-0.6

-0.2

0.2

0.6

1.0

1.4

1.8

2.2

Mate

rials

Co

ns G

oo

ds

Energ

y

Fin

ancia

ls

Health C

are

Ind

ustr

ials

Real E

sta

te

Techno

log

y

Tele

co

m

Utilit

ies

Global sector flows (last 4 weeks,% of assets)

30-Jan 6-Feb

13-Feb 20-Feb

-45

-30

-15

0

15

30

45

-45

-30

-15

0

15

30

45

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

Mar-

19

Cumulative sector flows since 2017 (monthly, $bn)Technology

Materials

Financials

Industrials

Cons Goods

Telecom

Utilities

Health Care

Energy

Real Estate


22

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Bond fund flows

Figure 57: Bond fund flows by category last 4 weeks Figure 58: Bond flows by category

-1.0

-0.5

0.0

0.5

1.0

1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

All

Bo

nd

s

Co

rp H

Y

Co

rp H

G

EM

Bo

nd

s

Go

vt

Bo

nd

s

Munis

MB

S

TIP

S

Ban

k L

oans

Bond flows (last 4 weeks, % of assets)

30-Jan 6-Feb 13-Feb 20-Feb

-140

-115

-90

-65

-40

-15

10

35

60

85

-140

-115

-90

-65

-40

-15

10

35

60

85

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

Mar-

19

Cumulative bond flows since 2017 ($bn)

Corp HY EM bonds

Corp HG Govt bonds

Munis MBS

TIPS Banks Loans


Figure 59: Bond fund flows by maturity last 4 weeks Figure 60: Bond fund flows by maturity

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Long term Intermediate term Short term

Bond fund flows (last 4 weeks,% of assets)

30-Jan 6-Feb

13-Feb 20-Feb

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

Dec-1

6

Mar-

17

Jun-1

7

Sep

-17

Dec-1

7

Mar-

18

Jun-1

8

Sep

-18

Dec-1

8

Mar-

19

Cumulative bond flows since Jan 2017 ($bn)

Long Term

Intermediate Term

Short Term


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Equity futures positioning - CFTC data as of Feb 5, 2019

Figure 61: Aggregate US equity futures positioning Figure 62: Russell 2000 futures positioning

-8%

-4%

0%

4%

8%

12%

16%

20%

24%

-8%

-4%

0%

4%

8%

12%

16%

20%

24%

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Aggregated US equity futures positions*

(as % of open interest)

Asset mgrs + Leveraged funds

*Based on futures positions in S&P 500, Russell 2000, NASDAQ 100, S&P 400 and DJIA;

Positioning data as of Feb 05 2019

950

1050

1150

1250

1350

1450

1550

1650

1750

-160

-120

-80

-40

0

40

80

Jan-1

6

Mar-

16

May-1

6

Jul-1

6

Sep

-16

No

v-1

6

Jan-1

7

Mar-

17

May-1

7

Jul-1

7

Sep

-17

No

v-1

7

Jan-1

8

Mar-

18

May-1

8

Jul-1

8

Sep

-18

No

v-1

8

Jan-1

9

Mar-

19

Russell 2000 net long futures contracts (thous)

Asset mgrs + Leveraged funds (lhs)

Russell 2000 (rhs)

Positioning data as of 05 Feb 2019

Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 05-Feb-19 Source: Deutsche Bank Asset Allocation & Delta-1 Strategy, CFTC, Haver Analytics, Data as of 05-Feb-19

Figure 63: US equity futures positioning Figure 64: EM equity futures positioning

-40%

-20%

0%

20%

40%

60%

-40%

-20%

0%

20%

40%

60%

Jan-1

6

Ap

r-1

6

Jul-1

6

Oct-

16

Jan-1

7

Ap

r-1

7

Jul-1

7

Oct-

17

Jan-1

8

Ap

r-1

8

Jul-1

8

Oct-

18

Jan-1

9US equity futures positions (% of open interest)

S&P 500 Russell 2000 Nasdaq 100 S&P 400 DJIA


700

800

900

1000

1100

1200

1300

-50

50

150

250

350

450

550

650

750

850

Jan-1

6

Mar-

16

May-1

6

Jul-1

6

Sep

-16

No

v-1

6

Jan-1

7

Mar-

17

May-1

7

Jul-1

7

Sep

-17

No

v-1

7

Jan-1

8

Mar-

18

May-1

8

Jul-1

8

Sep

-18

No

v-1

8

Jan-1

9

Mar-

19

MSCI EM net long futures contracts (thous)

Asset mgrs + Leveraged funds (lhs)

MSCI EM (rhs)



22

Febru

ary 20

19

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Bond futures positioning - CFTC data as of Feb 5, 2019

Figure 65: Aggregate bond futures positioning Figure 66: Bond futures positioning by maturity

-2200

-1800

-1400

-1000

-600

-200

200

-2200

-1800

-1400

-1000

-600

-200

200

Jan-1

6

Ap

r-1

6

Jul-1

6

Oct-

16

Jan-1

7

Ap

r-1

7

Jul-1

7

Oct-

17

Jan-1

8

Ap

r-1

8

Jul-1

8

Oct-

18

Jan-1

9

Bonds net longs in 10y equivalents (thous)Aggregated Non commercial net long contracts


-11.6% -12.6%

-4.5% -5.1%-3.5%

-24.7%-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

ED 2y

5y

10y

15-2

5y

25y+

Bond futures positions as % of open interest

Latest 1 week ago



Figure 67: Eurodollar futures positioning Figure 68: Bond futures positioning by maturity

1.0

1.5

2.0

2.5

3.0

3.5-4500

-3500

-2500

-1500

-500

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

93m Eurodollar futures positions vs 3m LIBOR

Non commercial net long contracts (thous, lhs) ED12 (rhs, inv)


-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Net long contracts as % of open interest2y 5y 10y 15-25y 25y+ ED



22

Febru

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FX futures positioning - CFTC data as of Feb 5, 2019

Figure 69: Trade weighted dollar positioning Figure 70: Euro futures positioning

84

86

88

90

92

94

96

-50

-30

-10

10

30

50

70

Jan-1

6

Ap

r-16

Jul-1

6

Oct-

16

Jan-1

7

Ap

r-1

7

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-1

8

Oct-

18

Jan-1

9

Trade wtd dollar futures positions vs USTWINon commercial net long contracts (thous, lhs) USTWI (rhs)

Trade wtd positions in JPY, EUR, GBP, AUD, CHF and CAD are used for calculating;

Positioning data as of 05-Feb 2019

1.04

1.08

1.12

1.16

1.20

1.24

-150

-100

-50

0

50

100

150

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Euro futures positions vs EURUSDNon commercial net long contracts (thous, lhs) EURUSD (rhs)



Figure 71: Yen futures positioning Figure 72: Canadian dollar futures positioning

100

102

104

106

108

110

112

114

116

118

120-150

-125

-100

-75

-50

-25

0

25

50

75

Jan-1

6

Ap

r-1

6

Jul-1

6

Oct-

16

Jan-1

7

Ap

r-1

7

Jul-1

7

Oct-

17

Jan-1

8

Ap

r-1

8

Jul-1

8

Oct-

18

Jan-1

9JPY futures positions vs USDJPY

Non commercial net long contracts (thous, lhs)

USDJPY (rhs, inv)


1.20

1.22

1.24

1.26

1.28

1.30

1.32

1.34

1.36

1.38

1.40-120

-70

-20

30

80

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Ap

r-19

CAD futures positions vs USDCADNon commercial net long contracts (thous, lhs)

USDCAD (inv, rhs)



22

Febru

ary 20

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Figure 73: Australian dollar futures positioning Figure 74: Sterling futures positioning

0.70

0.72

0.74

0.76

0.78

0.80

-80

-60

-40

-20

0

20

40

60

80

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Ap

r-19

AUD futures positions vs AUDUSDNon commercial net long contracts (thous, lhs) AUDUSD (rhs)


1.20

1.25

1.30

1.35

1.40

1.45

-120

-100

-80

-60

-40

-20

0

20

40

60

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Ap

r-19

GBP futures positions vs GBPUSDNon commercial net long contracts (thous, lhs) GBPUSD (rhs)



Figure 75: Swiss franc futures positioning Figure 76: Futures positioning across currencies

0.92

0.94

0.96

0.98

1.00

1.02

-50

-40

-30

-20

-10

0

10

20

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Ap

r-1

9

CHF futures positions vs USDCHFNon commercial net long contracts (thous, lhs)

USDCHF (inv, rhs)


-30% -30% -26%

-17% -16%-10%

2%

19% 21%

32%41%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

CA

D

AU

D

CH

F

GB

P

JP

Y

Euro

NZD

US

D

BR

L

MX

N

RU

B

Currency positioning as % of open interest

Latest

1 week ago



22

Febru

ary 20

19

Investo

r Po

sition

ing

and

Flows


Deu

tsche B

ank S

ecurities In

c.Pag

e 23

Commodity futures positioning - CFTC data as of Feb 5, 2019

Figure 77: Oil futures positioning Figure 78: Oil futures gross longs vs shorts

100

300

500

700

900

1100

100

300

500

700

900

1100Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

Jan-1

3

Jul-1

3

Jan-1

4

Jul-1

4

Jan-1

5

Jul-1

5

Jan-1

6

Jul-1

6

Jan-1

7

Jul-1

7

Jan-1

8

Jul-1

8

Jan-1

9

Net long crude oil futures positions

(Managed Money, million barrels)

Note: Net positions of combined WTI and Brent crude oil positions; Data as of 05 Feb 2019

0

250

500

750

1000

1250

0

250

500

750

1000

1250

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Managed Money combined crude oil futures positions

(million barrels)Gross longs

Gross shorts



Figure 79: Copper futures positioning Figure 80: Gold futures positioning

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

-50

0

50

100

Jan-1

6

Ap

r-16

Jul-16

Oct-

16

Jan-1

7

Ap

r-17

Jul-17

Oct-

17

Jan-1

8

Ap

r-18

Jul-18

Oct-

18

Jan-1

9

Ap

r-19

Managed Money Copper futures positions

Net long contracts (thous, lhs)

Copper ($/lb, rhs)


1125

1175

1225

1275

1325

1375

-130-80-302070

120170220270

Jan-1

6

Ap

r-1

6

Jul-16

Oct-

16

Jan-1

7

Ap

r-1

7

Jul-17

Oct-

17

Jan-1

8

Ap

r-1

8

Jul-1

8

Oct-

18

Jan-1

9

Ap

r-1

9

Managed Money Gold futures positions Net long contracts (thous, lhs)

Gold ($/troy oz, rhs)



22

Febru

ary 20

19

Investo

r Po

sition

ing

and

Flows


22 February 2019


Appendix 1

Important Disclosures

*Other information available upon request

*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced fromlocal exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subjectcompanies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other thanthe primary subject of this research, please see the most recently published company report or visit our global disclosurelook-up page on our website at https://research.db.com/Research/Disclosures/CompanySearch. Aside from within thisreport, important risk and conflict disclosures can also be found at https://research.db.com/Research/Topics/Equities?topicId=RB0002. Investors are strongly encouraged to review this information before investing.

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition,the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendationor view in this report. Parag Thatte, Hallie Martin, Srineel Jalagani, Binky Chadha

Equity Rating Key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holderreturn (TSR = percentage change in share price from currentprice to projected target price plus pro-jected dividend yield ) ,we recommend that investors buy the stock.Sell: Based on a current 12-month view of total share-holderreturn, we recommend that investors sell the stock.Hold: We take a neutral view on the stock 12-months out and,based on this time horizon, do not recommend either a Buyor Sell.

Newly issued research recommendations and target pricessupersede previously published research.

Additional ETF InformationInformation on ETFs is provided strictly for illustrative purposes and should not be deemed an offer to sell or asolicitation of an offer to buy shares of any fund that is described in this document. Consider carefully any fund'sinvestment objectives, risk factors, and charges and expenses before investing. This and other information can be foundin the fund's prospectus. Prospectuses about db X-trackers funds and Powershares DB funds can be obtained by calling1-877-369-4617 or by visiting www.DBXUS.com . Read prospectuses carefully before investing. Past performance is notnecessarily indicative of future results. Investing involves risk, including possible loss of principal. To better understandthe similarities and differences between investments, including investment objectives, risks, fees and expenses, it isimportant to read the products' prospectuses. Shares of ETFs may be sold throughout the day on an exchange throughany brokerage account. However, shares may only be redeemed directly from an ETF by authorized participants, in verylarge creation/redemption units. Transactions in shares of ETFs will result in brokerage commissions and will generatetax consequences. ETFs are obliged to distribute portfolio gains to shareholders. Deutsche Bank may be an issuer,advisor, manager, distributor or administrator of, or provide other services to, an ETF included in this report, for which itreceives compensation. db X-trackers and Powershares DB funds are distributed by ALPS Distributors, Inc. The opinionsexpressed are those of the authors and do not necessarily reflect the views of DB, ALPS or their affiliates.



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https://research.db.com/Research/Topics/Equities?topicId=RB0002

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Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.



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Additional Information

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It may also engage in transactions, for itsown account or with customers, in a manner inconsistent with the views taken in this research report. Others withinDeutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those takenin this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equity-linkedanalysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differfrom recommendations contained in others, whether as a result of differing time horizons, methodologies, perspectivesor otherwise. Deutsche Bank and/or its affiliates may also be holding debt or equity securities of the issuers it writeson. Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investmentbanking, trading and principal trading revenues.??Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They donot necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank providesliquidity for buyers and sellers of securities issued by the companies it covers. Deutsche Bank research analysts sometimeshave shorter-term trade ideas that may be inconsistent with Deutsche Bank's existing longer-term ratings. Some tradeideas for equities are listed as Catalyst Calls on the Research Website ( https://research.db.com/Research/ ) , and can befound on the general coverage list and also on the covered company ’ s page. 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The financial instruments discussedin this report may not be suitable for all investors, and investors must make their own informed investment decisions.Prices and availability of financial instruments are subject to change without notice, and investment transactions can leadto losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency otherthan an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is notnecessarily indicative of future results. Performance calculations exclude transaction costs, unless otherwise indicated.Unless otherwise indicated, prices are current as of the end of the previous trading session and are sourced from localexchanges via Reuters, Bloomberg and other vendors. Data is also sourced from Deutsche Bank, subject companies, andother parties.??The Deutsche Bank Research Department is independent of other business divisions of the Bank. 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?Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promiseto pay fixed or variable interest rates. For an investor who is long fixed-rate instruments (thus receiving these cashflows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thuscause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, thehigher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among themost common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, clientsegmentation, regulation (including changes in assets holding limits for different types of investors), changes in taxpolicies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or liquidation ofpositions), and settlement issues related to local clearing houses are also important risk factors. The sensitivity of fixed-income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, toFX depreciation, or to specified interest rates – these are common in emerging markets. The index fixings may – byconstruction – lag or mis-measure the actual move in the underlying variables they are intended to track. The choice ofthe proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexedto a typically short-dated interest rate reference index) are exchanged for fixed coupons. Funding in a currency that differsfrom the currency in which coupons are denominated carries FX risk. Options on swaps (swaptions) the risks typical tooptions in addition to the risks related to rates movements.??Derivative transactions involve numerous risks including market, counterparty default and illiquidity risk. Theappropriateness of these products for use by investors depends on the investors' own circumstances, including theirtax position, their regulatory environment and the nature of their other assets and liabilities; as such, investors shouldtake expert legal and financial advice before entering into any transaction similar to or inspired by the contents of thispublication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of thehigh degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than theamount of funds initially deposited – up to theoretically unlimited losses. Trading in options involves risk and is notsuitable for all investors. Prior to buying or selling an option, investors must review the "Characteristics and Risks ofStandardized Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp . If you are unable toaccess the website, please contact your Deutsche Bank representative for a copy of this important document.??Participants in foreign exchange transactions may incur risks arising from several factors, including the following: (i)exchange rates can be volatile and are subject to large fluctuations; (ii) the value of currencies may be affected by numerousmarket factors, including world and national economic, political and regulatory events, events in equity and debt marketsand changes in interest rates; and (iii) currencies may be subject to devaluation or government-imposed exchange controls,which could affect the value of the currency. Investors in securities such as ADRs, whose values are affected by thecurrency of an underlying security, effectively assume currency risk.?

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity inthe investor's home jurisdiction. Aside from within this report, important conflict disclosures can also be found athttps://research.db.com/Research/ on each company ’ s research page. Investors are strongly encouraged to review thisinformation before investing.

Deutsche Bank (which includes Deutsche Bank AG, its branches and affiliated companies) is not acting as a financialadviser, consultant or fiduciary to you or any of your agents (collectively, “You” or “Your”) with respect to any informationprovided in this report. Deutsche Bank does not provide investment, legal, tax or accounting advice, Deutsche Bank is notacting as your impartial adviser, and does not express any opinion or recommendation whatsoever as to any strategies,products or any other information presented in the materials. Information contained herein is being provided solely on thebasis that the recipient will make an independent assessment of the merits of any investment decision, and it does notconstitute a recommendation of, or express an opinion on, any product or service or any trading strategy.

The information presented is general in nature and is not directed to retirement accounts or any specific person or accounttype, and is therefore provided to You on the express basis that it is not advice, and You may not rely upon it in makingYour decision. The information we provide is being directed only to persons we believe to be financially sophisticated,who are capable of evaluating investment risks independently, both in general and with regard to particular transactionsand investment strategies, and who understand that Deutsche Bank has financial interests in the offering of its products



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and services. If this is not the case, or if You are an IRA or other retail investor receiving this directly from us, we askthat you inform us immediately.

In July 2018, Deutsche Bank revised its rating system for short term ideas whereby the branding has been changed toCatalyst Calls (“CC”) from SOLAR ideas; the rating categories for Catalyst Calls originated in the Americas region havebeen made consistent with the categories used by Analysts globally; and the effective time period for CCs has beenreduced from a maximum of 180 days to 90 days.

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