Investors Continued Pulling Cash from EM Funds in Q4

January 6th at 6:00am by Tom Lydon

Investors continued departing from emerging markets equity funds during the fourth quarter of 2013, a theme that was prominent in the first three quarters of the just completed year.

While investors poured almost $116 billion into developed markets funds in the fourth quarter, they pulled $11.5 billion from emerging markets funds, Barron’s reported, citing EPFR Global data.

During the fourth quarter, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), the largest emerging markets ETF by assets, shed almost $4.2 billion, making it the second-worst ETF behind the SPDR Gold Shares (NYSEArca: GLD) in terms of asset departures. [Goldman's Discouraging View of Emerging Markets]

The rival iShares MSCI Emerging Markets ETF (NYSEArca: EEM) lost $1.6 billion in the fourth quarter while the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) shed $1.04 billion. EWZ lost 17.5% last year, making it the worst performer among the four major BRIC ETFs. [Problems Await Brazil ETFs in 2014]

For all of 2013 five emerging markets ETFs – the three aforementioned funds along with the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB) and the iShares China Large-Cap ETF (NYSEArca: FXI) – ranked among the 10 worst ETFs in terms of outflows.

China funds raked in $2.2 billion in the fourth quarter while funds tracking South Korea, Asia’s fourth-largest economy, brought in $1.42 billion, Barron’s reported. FXI had fourth-quarter inflows of $342.18 million while the iShares MSCI South Korea Capped ETF (NYSEArca: EWY) brought in almost $437 million last quarter. Low valuations and optimistic 2014 outlooks have been drawing investors to Chinese and South Korean shares in recent months. [South Korea ETF Could Ring in New Year Higher]

Another pleasant fourth-quarter surprise included some ETFs with exposure to the emerging markets consumer. For example, the EGShares Emerging Markets Consumer ETF (NYSEArca: ECON) pulled in $117 million during the quarter.

EGShares Emerging Markets Consumer ETF

 

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EEM and EMB.

 

 

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.