EM Fund Flows Spring Back in Q1 2016

April 25, 2016 |Author: Marc Zeitoun, CFA | Categories: Chart of the Week, Emerging Markets

Emerging markets outperform other regions. The MSCI Emerging Markets (EM) Index gained +5.7% in Q1 2016, outperforming other regional indices, including MSCI Europe, Australasia, Far East (EAFE) (-2.9%) and S&P 500 Index (+1.3%) as highlighted in "Stellar Gains for EM to Start 2016" April 18, 2016.

Flows are back. As seen in the past, flows seem to follow performance. While the quarter started with outflows in January, flows turned positive in February as emerging markets rebounded and they saw a sharp reversal in March.  A total of $3.2 billion was added to EM mutual funds and exchange-traded funds (ETFs) in Q1 2016.1

Passive ETFs continue to be most attractive. Another trend that has continued in the EM category is the increase of flows into passive ETFs, at the expense of actively managed mutual funds. While the highly publicized departures of popular active EM portfolio managers measurably contributed to mutual fund outflows this past quarter, the flow into ETFs continues to be a longer term trend. EM ETFs saw inflows totaling +$2.7 billion in Q1 2016, while actively managed mutual funds experienced net outflows of -$1.2 billion. 

 

1EM mutual fund and ETF flows based on those open-end and ETF funds in the Diversified Emerging Market Morningstar category.
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