Emerging market funds suffer further outflows in May

Graph downThe first week of May saw net flows into emerging market equity funds turn negative after five weeks of net gains, with institutional investors behind the turnaround.

Institutional investors also redeemed large sums from US equity funds, the largest withdrawal from these funds in a single week since February, according to EPFR Global.

Key Asian markets suffered redemptions, according to the data provider. Renminbi-denominated redemptions from China equity funds were at the highest level in seven weeks, while Thailand equity funds sustained a fifth consecutive week of net outflows and Vietnam equity funds had their worst weekly outflow of the year.

While emerging markets suffered, frontier markets gained. As a group, frontier market equity funds have taken in net new money in 16 out of the 18 weeks so far this year, says the firm.

Other fund types that attracted net inflows in the first week of May were high yield bond funds and mortgage-backed bond funds. Meanwhile, retail redemptions from emerging market bond funds fell to their lowest level in nearly a year.

However, European pension schemes have shown "no sign" of rushing out of emerging markets, finds investment consultant Mercer in its latest European asset allocation survey covering 1,200 European pension funds. Almost half of the schemes surveyed have exposure to emerging market equities and almost a fifth have an allocation to emerging market debt, demonstrating a commitment to the long term return potential of these markets, says the firm.

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