Investors Flee Emerging Markets, Junk Bonds

March 28, 2005 ( - Following a period of losses, jittery investors pulled money out of riskier asset classes such as emerging market securities and high-yield bond funds through the week ending March 23.

According to industry-tracker Emerging Portfolio Fund Research (EPFR), emerging market stock fund outflows topped $761.9 million on the week, the worst decline since May of last year. The emerging market bond funds tracked by EPFR lost $136.6 million, the first weekly outflow of the year, according to reports from Reuters.

High-yield bond funds also saw net outflows, losing $866 million in the latest week. So far this year, investors have pulled $1.4 billion out of the 234 high-yield bond funds covered by EPFR.

Global emerging markets equity funds also took a hit on the week, losing $278.4 million; Europe, the Middle East and Africa also saw losses amounting to a total of $350.2 million. Asian (excluding Japan) funds saw outflows of $81 million. These funds have had “abysmal” performances over the past two weeks, with Latin American funds losing up to 9% of their value, according to EPFR. Global emerging market funds have lost an average of 5.7% over the same time span.

US equity funds also lost ground on the week, with $163 million flowing into other investments; this brings the year-to-date total outflows to $869 million.

EPFR states that capital is moving into less risky investments such as global/international equity funds and global bond funds. The former took in $768 million in the past week, which was the 11 th straight week of inflows; the latter took in $371.3 million, which brings the year-to-date inflows to $4.8 billion.

EPFR tracks 8,000 international and emerging market stock and bond funds with more than $3 trillion in assets.