Retail Investors flee from equities worldwide

Discussion in 'Wall St. News' started by ASusilovic, Jan 29, 2008.

  1. Retail investors worldwide pulled over $28bn (€19bn) from equity funds last week, fleeing for the safety of fixed income and money market products as stock markets oscillated. The sell-off included $10.7bn from emerging markets funds, making it the worst week on record for the asset class.

    EPFR Global, the funds tracker that produced the data, blamed the sell-off on mounting evidence the US will not sidestep a recession, creating fears for the global economy, as well as the European Central Bank's continued tough stance on interest rates.

    Fears over European banks' exposure to US sub-prime debt, as well as concerns that companies such as Ambac or Security Capital, which insure institutions' bond investments, will not be able to meet their commitments, added to the problems.

    EPFR said a "large chunk" of the cash withdrawn from equities found its way into money market funds, which are intended as safe but low-yielding investments. They absorbed $21.4bn for the week.

    Funds that performed well included financial services-sector products, paradoxically, absorbing a net $898m. Year-to-date inflows have now hit $2.75bn, which EPFR put down to investors betting that the sector was undervalued.

    Cameron Brandt, an analyst at the data provider, said the same thing could happen to emerging markets funds: "If the pattern we've seen in the flow data over the past 10 months holds up, it's likely that a sizeable number of investors will see this as a buy signal."

    Separately, December was the worst month in 15 years for UK-regulated open-ended funds and unit trusts as retail investors pulled out a net £377.4m, according to the Investment Management Association, the London-based industry body. Retail investors withdrew a net £332m in November, the first negative month for fund flows since 1992.

    Including institutional outflows, investors pulled a net £858.3m from UK funds in December, after withdrawing a net £1.2bn in November.

    At the end of the year UK investments funds under management totalled £439.2bn, a 7% increase from the previous year's figure of £410.5bn. The IMA added some institutional funds to its database at the beginning of 2007. Including those funds, the total assets under management figure for last year is £468bn, a 14% increase over the previous year's statistic.

    Richard Saunders, chief executive of the IMA, said: "The first 10 months of 2007 saw a continuation of the strong performance of the previous year. In November and December however, as the impact of the credit crunch began to be felt, investors significantly reevaluated their portfolios and the industry experienced its first overall retail outflows in 15 years.

    However, last year funds in the IMA's specialist sector outsold their rivals, primarily due to property funds which accounted for £2.1bn of net inflows, compared to £3.2bn into specialist funds as a whole. Specialist funds as defined by the IMA are those not accounted for by the mainstream sectors, so include regional and strategically-defined equities and fixed income funds such as UK equity income funds and global bond vehicles.

    The IMA's Saunders said: "The year as a whole was satisfactory for the industry, but the prospect is clearly more uncertain going into 2008."

    I think the message for the smart players should be clear enough...
  2. .......the past is certain, the future is uncertain. Duh!