Investors Trickle Back to Emerging Markets ETFs
April 1st, 2014 at 7:30am by Tom Lydon
March is over and it would be accurate to say that for the first time in what feels like an eternity, investors in emerging markets exchange traded funds were treated to a strong month. The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging markets ETFs by assets, each posted gains of about 6% last month.
But only as the rally in equity markets from Brazil to India to Turkey gained steam toward the end of March was there evidence of investors allocating new money to emerging markets ETFs. “Investors added a net $1.6 billion into ETFs focused on emerging-market equities and bonds in the five days through March 28,” report Ye Xie and Julia Leite for Bloomberg.
A nice factoid to be sure, but as of March 28, EEM sported net outflows for March while VWO was lighter by nearly $528 million for the month. The iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) did not bring in any new capital for the month ending March 28, but it did not lose any either. The same can be said of the PowerShares DWA Emerging Markets Momentum Portfolio (NYSEArca: PIE) and the PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSEArca: EELV), according to issuer data.
Investors are wading back into emerging markets bond and equity ETFs after 2013, a year in which five such funds, including EEM and VWO, were among the 10-worst hit ETFs in terms of outflows. That list also includes the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB), iShares China Large-Cap ETF (NYSEArca: FXI) and the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ). EWZ gained almost 13% last month. [Emerging Markets ETFs Flirt With Big Breakouts]
An important point to remember that is flows data is rarely an accurate performance predictor. For example, EWZ lost over $283 million last month. The WisdomTree India Earnings Fund (NYSEArca: EPI) soared nearly 14% last month, but for much of this year, investors have proven reluctant to pour money into India ETFs even as large institutional investors such as endowments and sovereign wealth funds have bid up Indian equities. [Investors Return to Indian Stocks]
Money flows to emerging-market ETFs last week were more than eight times the average of $197 million over the past 20 days, according to Bloomberg.
iShares MSCI Brazil Capped 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.