The week ending September 24 saw the end of money market funds' eight-week $151 billion (Dh554bn) outflow streak. But other fund groups continue to benefit from the liquidity created by these massive redemptions from last year's "safe haven", with 22 of the 24 major equity, sector and fixed income fund groups recording inflows and five of them – global and global emerging markets (GEM) equity and emerging markets, US and global bond funds – posting year-to-date highs.

Overall, equity fund groups posted collective inflows of $5.42bn, with emerging markets equity funds having their best week since early June, while fixed-income funds (other than money market funds) absorbed $6.75bn.

"Exchange-traded funds (ETFs) played a big role in this week's equity fund flows," said EPFR Global Senior Analyst Cameron Brandt. "Flows into ETFs accounted for 84 per cent of total equity fund flows, and were the reason japan equity funds had their worst week since late January 2008. That suggests investors are thinking a bit more tactically as they position themselves ahead of the third quarter earnings season."

Despite fresh doubts about China's ability to sustain current growth rates, fuelled in part by its slowing demand for commodities during Q3 2009, EPFR Global-tracked GEM equity funds absorbed a 39-week high of $2.07bn during the third week of September. Year-to-date (YTD) flows into this fund group now stand at $18.2bn compared to outflows of $12.2bn for the comparable period last year.

The other major emerging markets fund groups, Asia ex-Japan, Latin America and Emea equity funds, took in $427 million, $241m and $208m respectively.

In the case of the Emea equity funds, their 10th consecutive week of inflows was underpinned by the ongoing reassessment of the outlook for emerging European markets and by enthusiasm for South Africa and Russia's commodity stories. Flows into South Africa equity funds hit a YTD high of $61m and Russia equity funds took in fresh money for the eighth time in the past 10 weeks.


Asian exposure

Investors looking for Asian exposure continued to broaden their net in late September, with flows into South Korea equity funds hitting a 23-week high and Indonesia equity funds extending their current inflow streak to 12 straight weeks.

Japan equity funds stood out among the EPFR Global-tracked fund groups investing primarily in developed markets during the week, posting outflows of more than $800m. "That may be a case of investors taking money off the table ahead of the lengthy market holiday in Japan," said Brandt. "It is certainly at odds with the recent enthusiasm for this market and the inflows seen by the other major developed markets equity funds."

The biggest money magnets for the week were global equity funds, which pulled in a 102-week high of $2.04bn and extended their current inflow streak to 10 weeks and $10.6bon. The other major diversified fund group, Pacific equity funds, posted inflows for the 10th time in the past 12 weeks as Australia's commodity story continues to catch the eye of investors. Australia equity funds took in fresh money for a sixth straight week.

Europe equity funds, meanwhile, moved closer to breaking even in flow terms as they absorbed another $686m. YTD outflows now stand at only $730m.

Going into the third quarter they stood at $4.5bn, but a steady stream of better than expected data suggesting the worst is over for the region have helped regional markets and confidence indicators hit 11-12 month highs in recent weeks.

Macroeconomic data from the US has also tended towards the positive, but flows into US equity funds remain subdued as investors remain wary of the outlook for the world's largest economy when the current stimulus measures begin to wind down. In a shift from the previous week, however, funds managed for growth outperformed their value counterparts – in both flows and performance terms – across all capitalisations.


Sector funds

Several major EPFR Global-tracked sector fund groups lost momentum during the week as headwinds in the form of weaker Chinese demand, bigger than expected US oil stockpiles and profit taking began to build. But commodity sector funds absorbed another $939m during the week, financial sector funds took in another $252m and only two sector fund groups posted outflows.

With the public option all but banished from the debate over US healthcare reform, healthcare/biotechnology sector funds managed to post inflows for only the second time in the past eight weeks. Another defensive group, utilities sector funds, also took in fresh money that took YTD outflows – which stood at $589m going into Q3 2009 – down to $290m.

Real estate and energy sector funds, which took in $925m and $377m respectively the previous week, slipped in the face of weaker new home sales numbers and bigger than expected oil inventories, with the former posting outflows of $26m and the latter taking in a modest $83m.


Bond and fixed-income funds

Flows into EPFR Global-tracked emerging markets bond funds continued their recent surge, hitting a 189-week high of $727m during the week, as investor appetite for exposure to fixed income assets moved up another notch.

Both global and US bond funds posted their biggest inflows, in dollar terms, since EPFR Global started tracking them in early 2001, while balanced and high-yield bond funds extended their current inflow streaks to 25 and 13 straight weeks. Among US bond funds, short-term and inflation protection funds accounted for $631m and $385m respectively of the $3.57bn taken in by this fund group. US municipal bond funds accounted for the biggest share, absorbing $1.46bn.

Global bond funds, which on average allocate a third of their portfolios to US debt, have now taken in fresh money for 24 straight weeks. Than run, which has seen $18.7bn flow into these funds, is their longest since a 27-week streak that ended in early Q1 2007.

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