Emerging Market Funds Have Record Year in '03

Of the 961 dedicated emerging market equity funds with $122.1 billion in assets tracked by EmergingPortfolio.com – including GEM, Asia ex-Japan, LatAm, and Europe/Middle East/Africa equity funds – investors have pumped a total of $11.23 billion in new money into these funds year-to-date to December 10; a 15% increase in assets from the beginning of this year due to inflows.   With the inflow, e merging market equity funds have surpassed the previous record set in 1996, when there were inflows of $10.89 billion.

Equity funds were not the only group enjoying a flood of new funds.  Emerging market bond funds have also posted record-high inflows, with $3.3 billion in new flows, about double the $1.7 billion in new money last year.

EmergingPortfolio.com attributed the fresh money to a number of factors, including the fact that 2003 will be the fourth consecutive year of emerging markets outperformance of developed markets, the firm said in a news release.   Specifically, the company pointed to the MSCI Emerging Markets Free index – up 46% year-to-date – outperforming the MSCI World Index’s 25% return.

” Emerging markets are highly cyclical and, thus, are a leveraged play on global economic recovery, especially as monetary policy has eased throughout the emerging markets world,” says Brad Durham, a managing director of EPFR.

So far this year,Asia ex-Japan funds attracted record net inflows of $6.3 billion, a gain in assets on fresh money of 40%. Total assets now stand at $40 billion, up from $22 billion at the beginning of the year.

Likewise,Latin Americadedicated equity funds collected $379 million in new funds, the biggest year for inflows since 1997.   Additionally, EmergingEurope, the Middle East and Africa funds received inflows of $573.3 million, the most in three years.