EM Funds Attract Record Inflows


By Gordon Platt

Equity funds that are mandated to invest in all emerging markets globally ended September with their 18th consecutive week of net inflows, according to Cambridge, Massachusetts–based EPFR Global. Year-to-date flows into this fund group, as of September 30, reached 87% of the full-year record of $44.2 billion in 2009 and remained on track for another record-setting year.

At the country level, there has been a noticeable shift in the third quarter from the Bric (Brazil, Russia, India and China) markets toward smaller emerging markets, such as Turkey, Chile, Peru and Indonesia, EPFR Global says. Turkey’s equity funds absorbed more than twice the amount of new money as Russia’s equity funds during the third quarter.

Regional equity funds that invest in Africa also appear likely to attract record inflows in 2010, although the third quarter saw them post some big outflows, EPFR Global says.

Bond funds with local currency mandates continue to absorb the bulk of the fresh money flowing into emerging markets’ fixed-income funds. In September, India raised the ceiling on foreign ownership of government and corporate bonds. Foreign investors may now hold as much as $10 billion worth of Indian government bonds, up from $5 billion. The ceiling on infrastructure corporate bonds was lifted to $20 billion from $15 billion.

Net inflows into emerging markets bond funds globally in the first nine months of 2010 reached $39.5 billion, EPFR Global says.