Investors Continued Pulling Cash from EM Funds in Q4

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.