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Recovery uncertain, investors go for safety--EPFR

Reuters - Friday, June 26

By Daniel Bases

NEW YORK, June 25 - Investors seeking safety after a bout of risk-taking pushed $25.9 billion into money market mutual funds in the week ended June 24, data from Boston-based fund tracker EPFR Global showed on Thursday.

"Doubts about the timing of a recovery in the global economy also hit high yield bond and global equity funds, which saw inflow streaks of 14 and seven weeks snapped," EPFR said in a statement.

U.S. bond funds also benefited from the flight to safety, with net inflows of $1.72 billion. High yield bond funds had outflows for the first time since the second week of March.

"The inflows for money market funds and $209 million worth of outflows from dedicated high yield funds seem to corroborate evidence of greater uncertainty on the part of investors," David Spegel, global head of emerging market strategy at ING said in a note to clients.

For the week, EPFR said the global equity funds it tracks showed outflows of $4.12 billion.

It was emerging market equity funds that bore the brunt of the sell-off with the biggest outflows for Asia ex-Japan funds -- $660 million -- and Latin American funds -- $457 million.

This occurred as investors began to question "where and when demand for their manufactured and commodity exports will pick up," the firm said.

China equity funds suffered a net outflow of $262 million, the largest weekly outflow since the first week of March, while Greater China equity funds had outflows of $175 million.

Russian and Brazilian equity funds had outflows for the first time in 15 and 12 weeks, respectively, indicative of investor caution that demand for their commodities may not be as much as expected.

U.S. equity funds had outflows for the third time in four weeks, but EPFR said large-cap growth funds were the only general sub-group to take in fresh money.

"Once again funds managed for value outperformed their growth counterparts at the large and mid-cap levels, although flows favored growth funds across all capitalizations," the statement said.

European equity funds had a fourth straight week of outflows, with the bulk of the $602 million redeemed coming from funds with a regional mandate.

Japanese equity funds had a sixth straight week of outflows.

Sector funds focused on commodities and energy still managed to take in cash, but just barely, EPFR reported.

Commodity funds took in a net $4 million, while energy funds took in $10 million, extending their inflow streaks to 16 and 12 weeks, respectively.

Financial sector funds took in a massive $771 million, with the bulk of that going into exchange traded funds in what was their best performance since the second week of October 2008.

"Given the continued capital raising and doubts about the timing of the recovery, these flows may be attributable to short interest," EPFR Global senior analyst Cameron Brandt said in the statement.

In another sign of defensive investing, healthcare/biotechnology sector funds snapped a four-week losing streak and took in $138 million.

Emerging market bond funds took in a net $30 million, extending their inflow streak to 11 weeks.

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