Emerging markets equity funds suffer eleventh week of outflows, reports EPFR

Outflows

Fund groups saw “subdued flows” during the final week of April, as investors continued to pull money out of emerging markets equity funds, according to weekly research compiled by EPFR. 

The emerging markets equity funds tracked by EPFR suffered an 11th straight week of outflows. Overall, equity funds posted a collective outflow of USD6.7 billion, with emerging markets accounting for half of that total.

Funds dedicated to European, Korean, South African and Brazilian equity, experienced above average redemptions.

EPFR says that investors are “reluctant to move back into this asset class until more of the major markets have seen the Covid-19 pandemic peak and commodity prices regain their footing”. 

The biggest outflows were seen in Asia (excluding Japan) equity funds, which posted the biggest outflows in cash terms, and Latin America equity funds in outflows as a percentage of AUM.

Korea equity funds have so far seen flows inversely correlated to market performance for most of the year, and saw another USD1 billion flow out in late April, “as investors took profits and waited for credible information about the health of North Korean leader Kim Jong-un".

“The latest redemptions from Latin America equity funds were paced by heavy ouflows from Brazil Equity Funds, the biggest since mid-3Q13, as investors discount its reform story in light of the fallout from President Jair Bolsonaro’s handling of the Covid-19 pandemic. 

“That has included the firing of the respected health minister, Luiz Henrique Mandetta, and triggered the dramatic resignation of Justice Minister Sergio Moro. Brazil’s currency, meanwhile, hit a record low last week and forecasts for full year GDP growth now range from -3 per cent to -6 per cent,” says EPFR.

EMEA equity funds also saw declines during the final week of April due to investor worries over oil pricing volatility, and South Africa equity funds recorded their biggest outflows since 2007, after forecasts of a severe economic contraction in the country.

Nevertheless, investors looked favourably on Turkish and Australian debt, junk bonds, Mexican equity, and funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates. 

Money market funds zoomed ahead of the pack, enjoying the biggest inflows in cash terms across all EPFR’s segments, taking in a net USD91.5 billion, pushing their total year-to-date over the USD1.1 trillion mark.

EPFR is an Informa subsidiary that tracks over 123,500 traditional and alternative funds with more than USD33 trillion in total assets.

Overall, the week ending April 29 saw EPFR-tracked bond funds attract a net USD10.5 billion and alternative funds USD212 million.