Inflation fears drive investors to equity and bond funds
The first week of March (ending March 3) saw the biggest inflow to global bond funds in over a decade, while global equity funds enjoyed their biggest weekly inflow since October 2007.
EPFR Global reports that the week saw $30 billion pulled out of money-market funds as investors sought yield in an environment of low interest rates and fears about inflation in both emerging and some developed countries.
Global bond funds were the biggest beneficiary and have enjoyed a year-to-date net inflow of $41.3 billion. They took in $2.6 billion in the latest week, the biggest one-week total since EPFR began tracking data in 2000. Year-to-date, global bond funds have enjoyed a net inflow of over $16 billion. This is quite a contrast to the first quarter of 2009, when global bond funds saw a net outflow of $3 billion.
US, emerging-market and high-yield bond funds also enjoyed gains.
Global equity funds have experienced a net outflow year-to-date, but the recent allocations are helping the asset class turn around. The first week of March saw $2.3 billion of net inflows, reducing the YTD outflow to $11.6 billion.
Among emerging markets, the picture is mixed. Fears over sovereign risk and the Greek debacle kept emerging-market equity fund inflows muted, at a modest $240 million for the first week of March. YTD these funds have taken $2.2 billion of net inflows, says EPFR.
Within emerging-market equities, there is a trend away from global positions towards picking regions. Global emerging-market (GEM) funds saw outflows while Asia, Latin America and Europe/Middle East/Africa funds saw some inflows.
The big loser in the start of March was China. China equity funds lost a net $17 million that week, the eighth week of outflows this year. EPFR attributes this to fears over a change in policy at the annual meeting of the National People's Congress now taking place, in which the government is expected to address issues of inflation and asset bubbles. Vietnam funds are also experiencing a trend of outflows.
India funds, on the other hand, are on a roll, with inflows hitting a six-week high, says EPFR. Bric funds also are enjoying consecutive weeks of inflows. The numbers are particularly impressive for Africa.
In the developed world, investors continue to return. Although developed-market equity funds are down $12.2 billion year-to-date, this latest week saw a net inflow of $2.8 billion. The good news includes the US and Japan, but Europe continues to suffer net outflows.