Ukraine crisis steers investors to Russia and Switzerland equity funds
A week dominated by the political crisis in the Ukraine saw EPFR Global-tracked Russia and Switzerland equity funds post their biggest inflows since late 4Q13 and early 2Q08 respectively.
Another USD9.6bn flow into US equity funds, while emerging markets equity funds suffered net redemptions for the 19th straight week and flows into Europe equity funds fell to a 16 week low.
The first week of March was also a tough one for fund groups tied to Asia and its markets. Redemptions from Asia ex-Japan equity funds hit their highest level in over two years, Japan equity funds posted outflows for the first time year-to-date and investors pulled record setting amounts from Korea equity funds.
Overall, flows into EPFR Global-tracked equity funds during the week ending March 5 totalled USD7.47bn, with institutional investors accounting for over 90 per cent of the commitments to developed markets equity funds and two-thirds of the redemptions from emerging markets equity funds. A net USD1.8bn flowed out of bond funds and USD15.9bn out of money market funds.
At the asset class and sector levels investor appetite for convertible and junk bonds, healthcare and energy stocks and funds pursuing balanced or total return strategies remained strong. Inflation protected bond funds, one of the least popular fund groups over the past 12 months, posted their biggest weekly inflow since mid-2Q12.
With events in the Ukraine putting investors on edge, outflows from EPFR Global-tracked emerging markets equity funds accelerated for the second straight week in early March. Asia ex-Japan equity funds were hit especially hard as redemptions in regional currencies such as the won, baht, rupee and renminbi hit their highest weekly total in over a decade.
Although Russia was central to the Ukraine crisis, daily data showed that investors saw the aggressive sell off March 3 as an over-reaction. Daily flows into Russia equity funds on March 6 hit their highest level since mid-December and this fund group ended the week snapping an outflow streak stretching back to last year. Investors prospecting among EMEA country fund groups also committed modest amounts of fresh money to Turkey and Egypt equity funds, with the latter benefiting from moves by Egyptian regulators to energise the country’s equity markets.
EPFR Global-tracked commodities sector funds continued their modest rebound in early March, extending their longest inflow streak since a 16 week run ended in late 4Q12 as they pulled in the most new money since the third week of September. These funds, which saw a record setting USD47.7bn flow out last year, remain the second best performing sector fund group after healthcare/biotechnology sector funds.
In contrast to the previous two years, gold funds are having less of an impact on overall commodities sector fund flows. During the current streak gold funds have accounted for 55 per cent of the total inflows; last year they accounted for over 80 per cent of the total outflows. Something similar has occurred with energy sector funds. Over the past two years funds investing in master limited partnerships (MLPs) have accounted for all of the inflows seen by this fund group but, since the beginning of February, energy MLP Funds have accounted for less than half the net inflows for all energy sector funds.
Outflows from US government bond ETFs in early March saw EPFR Global-tracked bond funds four week inflow streak snapped during a week that also saw rare inflows for inflation protected bond funds and rare outflows for Spain bond funds. Investors piled more money into Europe, total return, high yield and convertible bond funds and kept pulling cash out of emerging markets and Asia-Pacific bond funds. Among the US bond fund groups it was a good week for municipal bond funds, which posted their biggest weekly inflow in over a year as Puerto Rico, whose fiscal woes have cast a shadow over this asset class in recent months, prepares to test the market with a USD3bn issue. US high yield bond funds took in over USD1bn, as did total return bond funds.
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