Deutsche Bank strategists said positioning in large-cap technology names has reverted sharply from previously extended levels and now sits close to neutral, estimating that the rotation away from the sector is about three-quarters complete.
The note, produced by a team led by Parag Thatte, highlighted a broader pullback in equity positioning last week. The strategists observed a pronounced reduction among discretionary investors, whose allocations fell sharply to below neutral. At the same time, systematic approaches scaled back exposure yet remained net overweight overall.
Within the systematic category, the strategists distinguished between types of strategies. Volatility control funds trimmed their equity allocations but continued to hold overweight positions. Commodity Trading Advisors also pared back slightly, though they remained toward the upper end of their historical positioning range.
Fund flows during the week reinforced the positioning picture. Equity funds attracted $30.4 billion of inflows in aggregate, with the bulk of that demand concentrated in Asia, which accounted for $21.3 billion. By contrast, U.S. equity funds experienced outflows of $7.2 billion.
Fixed-income and cash instruments showed different dynamics. Bond funds received $14.9 billion of inflows, a figure the strategists noted as a three-month low for weekly bond flows. Money market funds registered outflows totaling $33.9 billion, marking a second consecutive week of withdrawals.
Taken together, the bank's findings portray a market where positioning has materially adjusted from stretched bets on large-cap technology to a more neutral stance, while pockets of overweight exposure remain in some systematic strategies. Regional differences in flows - large inflows into Asian equity funds alongside U.S. outflows - were also highlighted as notable in the latest data.
Data points cited:
- Equity fund inflows: $30.4 billion, driven by Asia: $21.3 billion; U.S. outflows: $7.2 billion.
- Bond fund inflows: $14.9 billion (three-month low).
- Money market fund outflows: $33.9 billion for a second straight week.
- Deutsche Bank estimate: rotation out of large-cap technology roughly three-quarters complete.