Yet individual investors haven’t given up on emerging market funds despite the poor performance.
Diversified-emerging-markets funds have had net deposits of $27 billion this year through July, while U.S. large-cap stock funds have had net deposits of just $5 billion, Investment News reports.
“It’s really surprising how resilient the flows have been,” said Mike Rawson, a mutual fund analyst at Morningstar.
“It’s refreshing to see that retail investors haven’t abandoned emerging markets,” he said. “Just because performance is bad, it doesn’t mean you should sell everything.”
However, the flows tell a different story in ETFs. The $48 billion Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the $35 billion iShares MSCI Emerging Markets ETF (EEM) had a combined $10.8 billion pulled out by investors this year through July, according to the article.
Full disclosure: Tom Lydon’s clients own EEM and SPY.