Party's over? Funds swing to outflows

Graph downInvestors withdrew money from a number of funds in the week ending May 29, with emerging market products notably affected.

Equity funds tracked by US-based data provider EPFR Global had a net outflow of $2.79 billion (€2.1 billion) in the week, due partly to the highest level of retail redemptions so far this year. Emerging equity funds had their biggest weekly net outflow since 2011.

The data provider pointed to a number of gloomy factors that may have encouraged the redemptions, such as concerns about the eventual end of quantitative easing and worries about European politicians losing the will to make fiscal reforms.

Meanwhile, profit takers sent Japanese indices plunging, says EPFR Global, with a corresponding fall in inflows to Japanese equity funds. After a rapid ascent, the Nikkei 225 index has now fallen back to its level at the beginning of May.

It was a very different picture to the first quarter of the year, when rising stock markets and inflows into a number of funds encouraged observers to identify a return of investor optimism.

The European Fund and Asset Management Association says there was a net inflow of €130 billion into Ucits funds in the first three months of the year – the highest quarterly total since the first quarter of 2006.

In a recent release, the association said the figures pointed to a return in risk appetite. But with the current uncertainty in the markets, and volatility of the kind seen in Japan, there is a chance this appetite could evaporate over the summer.

Market watchers will be watching with particular concern to see if the United States stock market undergoes a correction. At time of writing, the S&P 500 index had increased 15% so far this year.

©2013 funds europe