Outflows from European funds as Cyprus fiasco unfolds

Graph downEuropean equity funds extended a string of weekly net outflows at the end of March as capital controls to protect the banking system in Cyprus prompted fear among many wealthy investors.

European bond and money market funds also saw significant redemptions in the week ending March 28, according to fund data provider EPFR Global.

Much of this money and more seems to have moved into United States and Japanese equity funds, which each had significant net inflows during the week, more than offsetting the redemptions in European equity funds. As a whole, equity funds tracked by EPFR Global took in net inflows of $1.9 billion (€1.5 billion).

Emerging market equity funds were affected by the climate of uncertainty. Redemptions from these funds were at their highest level in more than six months, says the data.

It seems events in Europe will continue to affect fund flows in coming weeks, according to EPFR Global.

“Retail investors were particularly unnerved by Italy’s failure to form a government nearly a month after the country’s voters went to the polls and comments - hastily qualified - by the Dutch Finance Minister to the effect that the bailing in of uninsured bank depositors could serve as a template for future rescue packages: redemptions by these investors jumped to their highest level in nearly 10 months.”

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