The investment bank’s weekly ‘Flow Show’ report, examines an equity fund universe of over $5.5 trillion globally, including ETFs and long-only mutual funds. ETFs account for the majority of flows the group tracks.
US equity funds have taken the lion’s share of the developed market inflows over the year to 17 July. Global funds were the next highest, followed by those exposed to Japanese equities. According to BofAML inflows have continued to go into global EM funds but investors are shunning single country and regional strategies. Of these, over the year so far, the biggest outflows have been from Latin American funds.
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In examining the various global markets, the BofAML report highlighted that analyst expectations for 2013 earnings growth in emerging markets remain higher than those for developed markets. However, earnings per share (EPS) growth expectations for2014 rise sharply for developed markets.
Jupiter Emerging Europe manager Elena Shaftan said in this environment of emerging markets outflows, she finds some comfort in that Russia has long been overlooked and so has been relatively untouched by the more recent sell-off. “When risk appetite does return, it is this abandoned and unloved market trading at absurdly low valuations of P/Es at 4.5x (lower than when we launched the fund in 2002) that, in my view, has the potential to deliver strong returns.”
Shaftan noted that Russian businesses do suffer from state interference and corporate practices that may leave a lot to be desired, but argues in this respect the country is not that different from other emerging markets. It is also changing, she added. Following her recent visit to the region, Shaftan commented that Russia has been making progress in reforms and in its work towards becoming a more appealing destination for foreign investors.
