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Globe and money

Money market funds lose heading into final week of February, says EPFR Global

The third week of February saw nearly every major EPFR Global-tracked fund group post inflows as cash pulled from US money market funds at the fastest clip since mid-3Q11 looked for new homes.

Overall, money market funds saw USD32.1bn pulled out during the week ending February 20 – with USD25.8bn of that coming from US funds – while equity funds absorbed a net USD8.58bn, bond funds USD3.47bn, balanced funds USD1.11bn and alternative funds USD710m.

Among the exceptions during another choppy week for global markets were gold and inflation protected bond funds.

“Despite the Fed’s recent efforts, and the ambivalence of some of its members about quantitative easing, investors clearly believe it has more to do to stimulate the economy and generate meaningful inflation,” says Cameron Brandt, director of research at EPFR Global.

Flows continued to favour funds offering exposure to bank loans, combinations of bonds and equity, alternative assets, emerging markets equity and debt, real estate and Japanese equity. The week also saw a rebound in Europe equity fund flows, which hit a 10 week high despite concerns that Italy’s impending election could stall the reforms that investors have aggressively bought into over the past three months.

Year-to-date flows into EPFR Global-tracked emerging markets equity funds pushed past the USD33bn mark in late February as they extended their current inflow streak to 23 weeks. The YTD total is already more than a third of the record yearly inflow these funds posted in 2010. Once again the diversified global emerging markets equity funds took in the lion’s share of the new money with Asia ex-Japan equity funds a distant second while EMEA equity funds posted outflows for the fourth time in the past five weeks.

Investors retained their appetite for EM funds with a dividend focus, committing fresh money for the 36th consecutive week. The pace of flows into emerging markets dividend funds, which peaked in early January, has lost some momentum in recent weeks.

At the country level China Equity Funds again stood out as its inflow streak hit 24 weeks and USD12.65bn. Over that period these funds have outperformed the fund groups dedicated to their BRIC peers and the other large emerging Asian markets, South Korea and Indonesia, by margins ranging from 3:2 for India equity funds to 3:1 for Russia equity funds and nearly 4:1 for Brazil equity funds.

The flight from gold funds accelerated during the third week of February as higher costs for mining companies, increased taxes in Vietnam and India and low expectations for inflation in the developed world all took their toll. But it was a fair-to-good week for most of the other major EPFR Global-tracked sector fund groups, with nine of the 11 posting inflows ranging from, USD4m to USD742m.

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