Overall, EPFR Global-tracked Equity Funds posted collective outflows of USD2 billion for the week ending 4 April. Bond Funds absorbed USD4.7 billion, with US Bond Funds accounting for over 55% of that total. Money Market Funds saw USD14.7 billion redeemed.
EPFR Global-tracked Emerging Market Equity Funds managed to post inflows for the 13th time in 14 weeks year to date, but just barely, taking in a paltry USD42.3 million. Investors showed a strong preference for the general over the specific. GEM Equity Funds took in over USD1 billion for the 10th week so far this year which narrowly offset redemptions from Asia ex-Japan, Latin America and EMEA Equity Funds.
In the case of Asia ex-Japan Equity Funds, worries about the outlook for the region’s key export markets were compounded by concerns about the direction of economic policy in India, Korea, Taiwan and Indonesia. India Equity Funds saw outflows hit a 32 week high as investors digested a proposal in the recent budget to enable the levying of retroactive taxes on certain M&A deals while Indonesia Equity Funds had their worst week since August in the wake of a failed effort to cut fuel subsidies.
There was a similar lack of enthusiasm for Brazil’s policymakers, who are viewed as increasingly protectionist and overly focused on growth despite the inflationary implications. Redemptions from Brazil Equity Funds came close to the USD400 million mark, the most since the second week of 2Q10.
Russia Equity Funds continue to stand out among the universe of EMEA funds, taking in fresh money for the 10th consecutive week as they extended their longest inflow streak since 1Q11. But Emerging Europe Equity Funds suffered net redemptions for the eighth straight week as Hungary’s lack of a deal with the IMF and the slowing growth in many Developed European markets took their toll.
Hopes that Greece’s departure from centre stage in Europe and more largesse from the US Federal Reserve will see the global economy safely through the summer took a beating during the week ending 4 April. As with emerging markets, those investors still seeing value in developed market equities opted for the most diversified exposure possible. Of the five major EPFR Global-tracked Developed Market Equity Fund groups, only Global Equity Funds managed to attract any new money, attracting USD267 million for the week.
Europe Equity Funds posted the biggest outflows as rising yields on Spanish debt sales spooked investors. Outflows from US-domiciled funds were the highest since mid-November, a reversal in sentiment since the US-domiciled Europe equity funds had taken in money for nine of the 14 weeks YTD versus overall outflows from this fund group in 10 of the 14 weeks. Institutional investors, meanwhile, remain reluctant to increase their exposure to the region’s strongest economy. During the first nine months of last year they committed a net USD17.7 billion to Germany Equity Funds. Since the start of 4Q11 they have added only USD97 million more.
During the same period — October to early April — institutional investors have committed over USD60 billion to US Equity Funds. But retail investors have pulled over USD95 billion, cashing out during a rally that has seen the average fund’s portfolio gain some 20%. The same pattern was evident during the latest week with modest institutional commitments more than offset by retail redemptions.
Retail investors did steer some money into Japan Equity Funds, but institutional investors were heading in the other direction despite evidence reconstruction money is really starting to flow and pressure on the Bank of Japan to back its 1% inflation goal with more concrete easing measures.
The bearish sentiment towards Japan added to the pressure on Pacific Equity Funds, which posted their biggest weekly outflow in over a year, while the other major diversified developed market fund group, Global Equity Funds, recorded modest inflows for the sixth week running.
Flows into dedicated Sector Funds during the first week of April reflected the diminished hopes for QE3, with redemptions from Financial Sector Funds and Commodities Sector Funds dedicated to gold and precious metals jumping to seven and 11 week highs respectively.
"As has been the case much of this year there was little evidence that money is chasing performance," says EPFR Global Research Director Cameron Brandt (pictured). "The second worst performer, Commodities Sector Funds, posted solid inflows overall while the second best, Utilities Sector Funds, extended their poor run when it comes to attracting fresh money."
During a week where the US Supreme Court heard arguments about the healthcare reform package, Healthcare/Biotechnology Sector Funds did post their biggest inflow since mid-January. There were also solid inflows into Industrial and Real Estate Sector Funds while Energy, Technology, Infrastructure and Consumer Goods Sector Funds recorded outflows ranging from USD4 million to USD179 million.
Risk appetite among fixed income investors slid several degrees in early April, with flows into High Yield, Emerging Markets, Mortgage Backed and Municipal Bond Funds all below their YTD weekly average while the diversified Global Bond Funds had their biggest inflow since the second week of January. Although flows into High Yield Bond Funds were a quarter of the USD2.3 billion weekly average they maintained during 1Q12, it was enough to push the YTD total over the USD31 billion mark and close to within USD600 million of the full year record total set in 2009.
Long Term Government Bond Funds suffered another week of outflows, bringing their year to date total outflows to USD1.1 billion as US Federal Reserve support for longer dated treasuries through its quantitative easing wanes.
US Bond Funds, meanwhile, took in over USD2 billion for the 13th time in the 14 weeks YTD and Balanced Funds, which invest in both equity and debt, posted their biggest inflow since last May.
Among the US Bond Fund sub groups, flows into Long Term Corporate Bond Funds rebounded as investors favouring that duration rotated out of government debt. Commitments to US Municipal Bond Funds continued their decline since peaking in late January as default rates edge up.
Emerging Markets Bond Funds extended their solid start to the year by pulling in another USD507 million, with the bulk of the fresh money going into funds with hard currency mandates. Emerging Asia remains the favourite region, Emerging Europe the least loved.
The latest concerns about Spanish debt did not stop investors steering more money into Europe Bond Funds, with retail investors accounting for more than half the total commitments as net inflows hit a nine week high.