U.S. Equities Get a Thumbs-Down, as Money Market and Overseas Funds Get Thumbs-Up

The emerging markets had net outflows of about $12 billion in the first half of 2008, $10 billion of which was out of Asia-focused funds (excluding Japan). Latin American-funds had $1 billion in inflows during the same period.

Along with Japan-equity funds, other fund groups with some momentum going into the second half of 2008 are Russia equity funds (with net inflows of $3.2 billion in the first half of 2008), Vietnam equity funds, Middle East and Africa regional funds (with net inflows of $1.2 billion), financial and real-estate sector funds, U.S. municipal bond and balanced funds.

Money-market funds have experienced more than $96 billion in net inflows in early 2008 vs. inflows of $30 billion in the same six-month period of 2007.

“Investors are still showing an appetite for oversold markets and sectors,” notes EPFR Global senior analyst Cameron Brandt. “Real-estate funds and financials certainly fall into that category. And, not surprisingly, oil producing regions and countries are faring well.” These two sector-fund groups have had net inflows of $1.8 billion and $7.1 billion respectively in the first half of this year. Commodity-focused funds attracted $2.8 billion in the same period (vs. $1.6 billion in the same year-ago timeframe).

Going into the third quarter of 2008, says EPFR Global, EMEA equity funds remain the best performing among the major emerging-markets fund groups in terms of drawing new money, “as investors continue to seek exposure to Russia’s resource story and the petrodollars flowing into Africa and the Middle East.” The research group notes, though, that Latin America equity funds are benefiting “from soaring prices for Argentine wheat, Brazilian iron ore, Peruvian gold, Mexican oil and other regional resource exports.”

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Janet Levaux, MBA/MA, is the managing editor of Research; reach her at [email protected].