Emerging market equity funds suffer redemptions-EPFR

NEW YORK Feb 11 (Reuters) - Emerging market equity funds suffered net outflows in the week ended Feb. 10, largely as a result of jitters over Greece's fiscal crisis, Boston-based fund tracker EPFR Global said in a statement on Thursday.

Emerging market equity funds had net outflows of $2.9 billion, with $1.76 billion - a 60-week high - coming just from the diversified global emerging markets equity funds (GEM) category.

Investors concerned that Greece's budget woes might be just one example of a fiscally strapped European Union member, with eyes on Portugal, Spain, Ireland and Italy, prompted a flight to safety trade that pushed more cash in fixed income funds.

The outline of a U.S. Federal Reserve exit strategy from monetary stimulus, and the prospects of higher credit costs worldwide contributed to the pull-back from equity funds.

But this did not stop the continued drain of cash from money market mutual funds as the hunt for higher-yielding assets was not completely shut down.

Money market funds had $9.62 billion in net redemptions in the latest week, and putting the year-to-date weekly outflows around $80 billion. EPFR said that emerging market equity funds, combined, had their worst week of outflows since July 2008.

"Overall, EPFR Global-tracked bond funds posted collective inflows of $3.7 billion, boosted their year-to-date tally to $26.05 billion, while their equity counterparts saw a net $5.34 billion flow out during the week ending Feb. 10," EPFR said.

U.S. and global bond funds took in $2.4 billion each, bringing their inflow streaks to 43 and 58 consecutive weeks, respectively.

High-yield bond funds had more than $1 billion in net outflows.

Year-to-date, U.S. bond funds have taken in a net $12.1 billion. In the latest week 46 percent of total net inflows went toward short-term bonds, followed by 24 percent into intermediate debt and 23 percent into municipal bonds.

Emerging market bond funds had nearly $700 million in net inflows, their best week since late November, with 43 percent of that figure being put to work in local currency funds.

EQUITY FUNDS

EPFR said that in the U.S. equity fund category, modest outflows from large and mid-cap funds more than offset new money taken in by U.S. energy sector funds and passively managed small-cap blend funds.

"Net redemptions from US Equity Funds, which have yet to register weekly inflows year-to-date, now stand at $21 billion," EPFR said.

Global equity funds, which invest primarily in developed markets, had a 33-week high of $791 million in redemptions while Pacific equity funds had a third consecutive week of outflows.

Despite the increased tensions between China and the United States over an arms deal to Taiwan, investors pushed an a net $64 million extra into Taiwan equity funds as Taiwanese exports rebounded, EPFR said.

The concerns about Europe's finances and the general risk aversion that pushed the U.S. dollar higher kept up the pressure on commodity sector funds.

"These funds, which accounted for two-thirds of all the new money committed to sector funds during 2009, posted a sixth consecutive week of outflows - their longest losing streak in over three years - as investors redeemed a 67-week high of $526 million," the firm said.

Russian equity funds had a third week of outflows, but Africa regional equity funds chalked up a 23rd straight week of inflows.

Latin American equity funds had a third consecutive week of redemptions, putting their fund flow tally in negative territory year-to-date for the first time since the first quarter of 2008.