U.S. funds get flight-to-safety cash flows-EPFR
By Daniel Bases
NEW YORK, Oct 3 (Reuters) - In the depths of the credit crisis and the initial rejection of the U.S. financial bailout plan, U.S. stock and money market funds took in more cash than any other fund group, data from EPFR Global showed on Friday.
"For all the talk, the U.S. is sneezing and at least in terms of fund flows, everyone else is catching a cold," said Cameron Brandt, global markets analyst at the Boston-based firm.
"Not necessarily true in terms of their economies' relations to the U.S. but investors are basically reverting to old habits. We have money going to the U.S. pretty much regardless of what it does," he said.
The fund-tracker said in the week ended Oct. 1 U.S. stock funds took in a net $7.99 billion, a fifth straight week of gains. In the third quarter, U.S. funds took in a net $42 billion of fresh cash but for the year they suffered outflows of $15.6 billion.
Money market mutual funds took in a net $5.947 billion last week. For the quarter, this fund group took in a net $40.88 billion in fresh cash, bringing the year-to-date total to $137.2 billion.
On Friday the U.S. House of Representatives passed the $700 billion financial bailout plan which was quickly signed by U.S. President George W. Bush. The plan is meant to underpin banks and other financial firms straining under bad mortgage-related assets.
According to Brandt, the pattern of fund flows is showing a flight-to-safety quality, not seen recently.
"In the last month of a quarter, people move money in to basically make a bet on the rebalancing of the big index funds... The money comes in but usually this week you would see a big outflow. The money is not just coming in for a tactical reasons. It is staying," Brandt explained.
In another recent development, Japanese funds strung together a second straight week of inflows. Investors put in a net $294.5 million last week. For the year however, outflows are $5.98 billion.
Long-only dedicated emerging market stock funds managed to take in a net $146.3 million in the latest week. That was small consolation for the sector which had net outflows of $20.538 billion in the third quarter.
All emerging market funds combined had a net outflow of $32.8 billion year-to-date versus a $20.6 billion inflow in the same period a year ago.
For emerging market stocks, the benchmark MSCI index suffered its worst quarter on record, falling 27.61 percent .MSCIEF.
Latin American stock funds had outflows for a 17th straight week, losing $361 million to redemptions. For the quarter, the fund sector had $5.176 billion in net outflows, bringing the cumulative amount for the year to a negative $4.175 billion. In the same period a year ago this sector took in a net $8.2 billion in fresh cash.
EMEA funds (Europe, Middle East, and Africa) had redemptions of $310.674 million, the 13th week of outflows in the last 14 weeks. The third quarter pulled the sector into the negative column as $4.7 billion was pulled out bringing the year-to-date total to an outflow of $1.86 billion.
Among the various sector fund groups for the latest week, energy had outflows of $1.288 billion, financials lost $942 million to redemptions while real estate funds had a net $703.5 million pulled out.
DEBT SUFFERS TOO
Emerging market bond funds continued to shed cash.
Overall, this fund group lost $982.8 million to net redemptions in the latest week. U.S. dollar-denominated funds had outflows of $545.38 million, followed by $318.6 million for local currency denominated bond funds and $118.8 million for blended funds.
In the third quarter, the sector's net outflows totaled $5.23 billion, bringing the total cumulative amount of cash outflows for the year so far to $4.57 billion versus a $3.35 billion inflow in the same period a year ago.
The recent flight-to-safety trade during the wrangling in Washington didn't necessarily mean U.S. bond funds benefited from a surge in U.S. Treasury buying.
As a whole, U.S. bond funds had net redemptions of $1.29 billion last week. For the quarter however, inflows were $549 million bringing the year-to-date figure to $8.9 billion versus $7.2 billion in the same period last year. (Reporting by Daniel Bases; Editing by Diane Craft)
