Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
Last week marked the worst week for emerging market equity funds since they lost $10.7 billion in outflows during the third week of January.
Outflows from the diversified global emerging markets (GEM) and Asia ex-Japan equity funds both exceeded $1 billion each, with the latter having its second worst week year-to-date, while Latin America equity funds reported outflows of $548 million last week.
Emea equity funds suffered in part because flows into Russia equity funds turned negative after a 10-week, $1.76 billion run of net inflows. The battle for control over oil major BP-TNK has banished much of the recent goodwill generated by new President Dmitry MedvedevÆs remarks in support of property rights and less direct state involvement in the business sector, EPFR Global says.
Asia ex-Japan equity funds, which have now posted outflows for six straight weeks, are being sapped by doubts that many key markets in the region can effectively balance the competing policy goals of a competitive currency for exporters and a monetary policy tight enough to effectively rein in rising inflation.
These concerns have not stopped investors from stepping back in when they believe markets are oversold, however. Funds geared towards Vietnam, whose benchmark equities index fell 22% in the second quarter of 2008, have posted inflows for 10 of the past 14 weeks.
At the country and sub-regional level, Middle East and North Africa equity funds (Mena) extended their notable run, posting inflows every week so far this year, and Vietnam equity funds attracted more contrarian money. But all of the fund groups geared to the Bric (Brazil, Russia, India and China) markets recorded outflows, as did Bric equity funds.
Financial sector funds continued to benefit from rock bottom valuations, hopes for further consolidation and speculation that more sovereign wealth fund money will move into the sector, EPFR Global says. A fifth straight week of positive flows took year-to-date inflows for this group over the $7 billion mark despite owning by far the worst performance numbers of the nine major sector fund groups.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains