Equity inflows pick up, but cash allocations grow-EPFR

Fri Sep 10, 2010 4:51am BST

Related Topics

* Global equity funds see $8 bln in inflows, most going to US

* High yield bond funds attract $700 mln in week

* Emerging market stocks still hot, bonds less so

HONG KONG, Sept 10 (Reuters) - Equity funds posted the biggest weekly inflows in more than a month in early September, reflecting some comfort with the global economic outlook, though fresh cash allocations showed the limits of risk taking, EPFR Global data showed on Friday.

Stock funds tracked by the fund research firm absorbed an aggregate $8.43 billion, during the week to Sept. 8, the most in six weeks. Bond funds also saw new money, taking in $4.13 billion.

Despite the evidence of investors' money being put to work, money market funds, an equivalent of cash, saw inflows for the fifth time in the past seven weeks.

U.S. exports and manufacturing activity have had surprisingly positive readings, improving the confidence of economies and companies in the supply chain. However, consumer spending and employment remain weak and appetite for riskier assets may remain suppressed until they also show some strength.

EMERGING MARKET EQUITY FUNDS

Confidence in emerging markets has been a constant in the post-financial crisis world.

This fund group in aggregate had $1.87 in inflows in the latest week, with Global Emerging Market funds extending their inflow streak to 15 weeks.

Latin America-focused funds did the best, attracting a 25-week high of $190 million.

Asia ex-Japan and Europe, Middle East & Africa funds saw modest inflows.

DEVELOPED MARKET EQUITY FUNDS

U.S. equity funds chalked up weekly inflows of $6 billion, accounting for three quarters of global equity inflows, driven by buying of large cap ETFs, mid cap blended funds and value funds.

However, year-to-date, U.S. equity funds have had net redemptions of $30.3 billion.

Europe equity funds had inflows of more than $1 billion, though year-to-date outflows still total $11.6 billion.

Japan saw small outflows of $101 million.

SECTOR FUNDS

The picture was mixed at a sector level.

The cyclical energy sector took in $252 million, bringing 2010 inflows to $1.6 billion, the third highest after commodity and consumer goods sector funds.

However, defensive sectors also did well. Flows into healthcare funds were at a five-week high and utilities sector funds had inflows for the eighth time in the past nine weeks.

BOND FUNDS

Emerging market bond funds saw inflows but they were the lowest since early June. Inflows into emerging market local currency bond funds slipped to a 14-week low.

Tolerance for risk was evident in junk bonds. High yield bond funds had $700 million in inflows for the week, bringing year-to-date inflows up to $10.6 billion.

Global and U.S. bond funds pulled in $1.31 billion and $2.01 billion, respectively.

Flows into U.S. bond funds were influenced heavily by buying of municipal debt as investors search for assets that offer reasonable yields and some protection from the tax increases expected in 2011. (Reporting by Kevin Plumberg; Editing by Tomasz Janowski)

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