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Investors fled equity as an asset class in the third quarter of 2011 as global growth faltered and risk aversion soared on the burgeoning sovereign debt troubles in the European region. According to global fund-flow data tracker, EPFR Global most equity funds witnessed strong outflows even as money continued to flow in to bond funds and commodity funds.
Equity sinks
Emerging market equity funds witnessed outflow of $36.3 billion in the first nine months this year with the September quarter alone accounting for $23.3 billion. As investors fled riskier asset classes, emerging market equity too took a strong hit last quarter. In contrast, the first nine months of 2010 saw these funds receive inflows of $52.4 billion.
S&P downgrade on US sovereign debt appears to have affected the fund flow in to US equity funds between July and September. Investors pulled out $53 billion from this region in this period. The outflow in the first six months was more moderate at $6.3 billion. The only region to buck the sinking trend in global equity funds was Japanese equity funds that received in inflow of $2.1 billion in the September quarter.
BRIC funds
Funds from all four BRIC nations, Brazil, Russia, India and China witnessed outflows in the third quarter of this calendar. India funds saw outflow of $1.8 billion in the September quarter while the outflow in the first nine months of the year amounted to $3.2 billion. While Brazil, India and Chinese funds did not have it easy in the first half of the calendar, Russian equities were in vogue in the first six months due to strong commodity prices.
Sector Funds
Investors flocked to commodities funds and this was the sector fund that witnessed the largest inflow in the latest quarter. Exodus of money in to the perceived ‘safe haven' of gold that sent the yellow metal surging close to the $1950 per ounce could be one of the causes behind this surge. Consumer goods and Utilities were other themes that attracted global investors. All other sectors including Energy, Real-estate and Technology witnessed outflows.
Bond Funds
Rising risk aversion caused by downgrades of various countries in Europe sent investors in to the safety of US bonds from the higher yielding Emerging market bonds towards the end of the September quarter. But Emerging Market Bond funds still managed to draw more inflows at $4.8 billion compared to US Bond funds at $3.5 billion in the last quarter.
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