Investors flee emerging and high-yield funds--EPFR
Investors flee emerging and high-yield funds--EPFR By Mark McSherry Mon Mar 28, 2005 12:48 PM ET
NEW YORK, March 28 (Reuters) - Concerns about U.S. inflation and interest rates caused global investors to flee funds invested in riskier assets like emerging market securities and high-yield bonds in the week through March 23, according to Emerging Portfolio Fund Research (EPFR).
Emerging market stock funds tracked by EPFR suffered combined net outflows of $761.9 million in the latest period, their worst week of outflows since May 2004.
Emerging market bond funds tracked by EPFR posted their first weekly outflow in 21 weeks, losing $136.6 million.
The 234 high-yield bond funds with about $60 billion of assets tracked weekly by EPFR had outflows of $866 million in the latest week, their worst outflows of the year.
Investors have pulled $1.4 billion out of these high-yield bond funds so far this year.
"At this point in the economic cycle, when the U.S. Federal Reserve is tightening monetary policy and liquidity worldwide is theoretically drying up, the conventional wisdom has always been that you sell emerging markets, because they are highly cyclical," said Brad Durham, managing director of EPFR.
"But I would counter that by saying the macro risk in emerging markets has declined significantly. This is not the same asset class it was in 1997.
"Now is the moment of truth. Is this the time that emerging markets rise and go through a re-rating? Or are they going to sink back like they always have at this point in the cycle?"
Cambridge, Massachusetts-based EPFR tracks about 8,000 international and emerging market stock and bond funds with more than $3 trillion in assets, covering up to 90 percent of emerging market stock funds and two-thirds of U.S. funds.
BROADER EXPOSURE
Global emerging market (GEM) equity funds had outflows of $278.4 million in the latest week, while high-flying Europe, Middle East and Africa (EMEA) stock funds, which had been receiving record-setting inflows in recent months, lost $350.2 million.
Asia ex-Japan equity funds showed outflows of $52 million, and investors pulled $81.3 million from Latin America stock funds.
EPFR said returns have been "abysmal" for these funds over the last two weeks, with Asia ex-Japan fund net asset values falling about 4 percent, GEM funds declining 5.7 percent and EMEA and Latin America funds dropping between 8 and 9 percent.
Year-to-date, their performances are still in positive territory, with EMEA funds rising 8.3 percent, GEM funds up almost 4 percent, Asia ex-Japan funds advancing 2.4 percent and Latin America rising 1 percent.
EPFR said investors continued to favor funds offering broader exposure to global markets such as global/international equity funds and global bond funds, both of which had healthy inflows in the latest week.
Global/international equity funds took in $768.7 million of net inflows during the week, their 11th straight week of inflows. Year-to-date, these funds have taken in $6.8 billion of net inflows.
Global bond funds tracked by EPFR took in a net $371.3 million in the latest week, and have had year-to-date inflows of $4.8 billion.
Meanwhile, investors also continued their net redemptions of U.S. stock funds. U.S. equity funds tracked by EPFR lost $163.2 million to outflows during the latest week, increasing their year-to-date outflows to $869.3 million.
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