Emerging market equity inflows continue amid wider flight to safety

investment newGlobal and emerging market equity funds saw inflows in June – but bond funds continued to take the lion’s share of money as investors sought safety and yield.

Fund flow figures from Calastone, which manages a global fund transaction network, saw bond funds raise £880 million of new money, according to the firm’s Fund Flow Index.

Money market funds, another place of relative safety and yield, took in £503 million.

On the whole, investors swapped equity, mixed assets and property funds for fixed income and money markets in June. Equity outflows were £662 million, followed by mixed assets and property.

The firm also reported that in equity sectors, “strong outflows” were seen in the UK, North America and ESG funds.

“Technology funds benefited from AI hype,” the firm added.

June’s figures are part of a pattern that has extended since central banks started raising interest rates, according to the firm. Over the last 12 months, investors have pulled £3.65 billion from equity funds and pumped £7.29 billion into fixed income. 

Edward Glyn, head of global markets at Calastone, said: “Fixed income funds and their money market cousins have not looked so attractive since before the global financial crisis. At the same time, recession fears are stalking equity and property markets – investors are nervous. The result is a flight to safety.”

He noted that money markets currently offer income of 5% or more at very low risk, while fixed income funds, which invest in longer-dated bonds than money market ones, offer the chance to lock into the “highest yields in years”. 

The is a structural investor preference for global funds, but emerging market have enjoyed their best six-month run of inflows on record, said Glyn, totalling £1.6 billion as investors leap on relatively low valuations.

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