NEW YORK, March 29 Investors bailed out of both
European and emerging market equities going into the last week
of the first quarter over worries involving Cyprus's bailout and
its impact on the euro zone crisis, EPFR Global data showed
Funds dedicated to Russia, which is exposed to declining
commodity prices and the euro zone crisis, had their worst week
since the third quarter of 2011, while emerging Europe equity
funds saw over $100 million pulled out for the second week
running, according to weekly EPFR data through Wednesday.
"With the messy end-game of the Cyprus bailout dealing a
blow to the notion that the worst may be over for the euro zone
and fueling fears of similar events in Slovenia or Hungary,
redemptions from EPFR Global-tracked Emerging Markets equity
funds jumped to a 29-week high heading into the final days of
March," Cameron Brandt, director of research at EPFR, said in a
A European deal to save Cyprus's banking system has roiled
global markets in recent weeks. The bailout package has put
intense pressure on the relationship between the euro zone
member's government and the banking sector, which faces severe
contraction and job losses.
EM equity funds suffered net outflows of $1.58 billion,
their biggest weekly redemption since early September.
Not coincidentally, investors poured money into bond funds,
their favorite flight-to-quality assets.
U.S. bond funds accounted for the bulk of the $3.72 billion
that flowed into EPFR global-tracked bond funds during the week
ending March 27, Brandt said, adding that flows into short-term
U.S. government bond funds hit a 47-week high.
"There was evidence of a slight increase in risk appetite
among fixed income investors," he added.
Flows into emerging markets bond funds climbed to a
five-week high and approached the $1 billion mark for high-yield
bond funds, EPFR said. Funds specializing in bank loan debt took
in over $1 billion for the eighth week year-to-date, EPFR added.
Conversely, Europe bond funds saw the biggest outflows among
the major bond fund groups with Italy, Spain and Switzerland
bond funds the only regional country fund groups to see any
"Appetite for Swedish debt, which peaked coming into the
first quarter, has faded with Sweden bond funds posting back to
back weekly outflows for the first time since September," Brandt
Municipal bond funds extended their longest outflow streak
since the third quarter of 2011 as Detroit's new state-appointed
emergency manager started work.
Still, it wasn't all doom-and-gloom for equities in the
U.S. equity funds took in fresh money for the fourth
consecutive week, their longest inflow streak since the fourth
quarter of 2011, with actively managed funds outgaining ETFs for
the first time since the third week of January. Small and
mid-cap equity funds again attracted the bulk of the inflows,
Among the Latin America country fund groups, Mexico equity
funds continued to stand out "thanks to Mexico's linkage to the
U.S. economy and hopes that President Pena Nieto's
administration will push through some long overdue structural
reforms curbing major oligopolies and opening up key sectors to
foreign investment," Brandt said. The $406 million they took in
was the highest in over a decade.