Investors seek safety in money market: EPFR

By Daniel Bases

NEW YORK (Reuters) - Investors played a defensive game and put their cash mostly into money market and U.S.-based funds in the week through Wednesday, according to Boston-based fund tracker EPFR.

In addition, a smattering of cash flowed into healthcare and biotechnology funds and some bargain hunting gave beaten down Vietnamese and financial sector funds a boost.

"We seem to be locked in a fairly low-key defensive pattern with really only money markets funds, funds geared to the U.S. and some sector funds attracting any money," said Cameron Brandt, global markets analyst at Boston-based fund tracker EPFR Global.

U.S. money market funds had a net cash inflow of $9.05 billion in the latest week while U.S.-based equity funds were the bright spot in an otherwise bleak atmosphere, taking in a net positive $2.64 billion in fresh cash.

This occurred during a time when the American benchmark S&P 500 stock index swooned 3.5 percent before recovering to close the week to Wednesday nearly unchanged.

"The current investment regime is safety first. The safety-first investment regime is characterized by institutional investment flows favoring developed equity markets over emerging," State Street Global Advisors wrote in a Friday research note.

According to EPFR data, long-only dedicated emerging market equity funds had net cash outflows of $1.66 billion in the latest week while international funds had net cash outflows of $2.17 billion.

Developed markets such as Europe and Japan were losers as well. Japanese funds suffered redemptions of $28.2 million, the first week of net outflows after a 10 week run of gains. Western European funds had net outflows of $395.1 million while funds specializing in Europe, Middle East and Africa had net outflows of $287.5 million.

On the positive side, Vietnam, where the benchmark stock index is down nearly 50 percent this year, had net inflows of an equivalent $32.18 million.

Overall emerging market equities, as measured by the benchmark Morgan Stanley Capital International's index .MSCIEF lost 2.03 percent.

Sector funds dedicated to health-care and biotechnology, took in a combined $617 million while financial sector funds gained a net $280 million in fresh cash.

DEBT

The picture for trading in debt funds was not too rosy either.

Against a backdrop of U.S. benchmark 10-year Treasury yields rising 12 basis points, all major bond fund groups suffered redemptions, except for safe-haven flows into money market funds.

Dollar-denominated emerging market debt funds had $172 million in net cash outflows. In a familiar pattern, local-currency denominated debt funds had a net cash inflow of $68.9 million.