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24 April 2024

Emerging market equity funds draw $1.6bn last month

Inflows into US equity funds during December reduced by half the cumulative outflows for the year. (AP)

By Staff Writer

Emerging market equity funds ended last year on a positive note, attracting $1.6 billion (Dh5.87bn) of investor contributions in December and reducing the record net outflows from these funds in 2008 to $48.3bn said EPFR Global, which provides fund flows and asset allocation data to financial institutions around the world.

A year when cash was once again king and safety the paramount concern of most investors ended with money market funds adding to the $455bn of total net inflows received during 2008 while inflows into US equity funds during December reduced by half the cumulative outflows for the year.

Year-end fund flows using monthly flow data for January-November and weekly flow data for December shows an historic flight of investor capital from all major equity and most fixed income fund groups.

Investors pulled a total of $321.4bn from the combined equity and bond funds tracked by EPFR Global. And excluding ETFs, which can report inflows in a down market when they are aggressively purchased for lending on to short sellers, total outflows from all non-ETF equity and bond funds amounted to a whopping $475.6bn.

Where did the nearly half trillion in US dollar terms that global investors removed from funds go? It went primarily into money market funds, which enjoyed record inflows of $455bn in 2008, a rise of nearly 15 per cent to the total assets of this fund group, despite a huge outflow in September on investor panic after a major money market fund reported exposure to troubled corporate bonds and dissolved amid investor flight after its net asset value fell below $1.

Overall, outflows from all equity funds were $232bn, with Europe equity funds, emerging market equity funds, and global equity funds responsible for about $186bn of the net redemptions including ETFs, and $244bn excluding them.

While US equity fund outflows amounted to just $27bn including the ETFs, the data excluding the exchange traded funds, which are big among investors in the US for both long and short exposure, resulted in a $133bn outflow shocker.