Russian Strategy - Weekly EM/FM Equity Fund Flows Near Record High, but All for China

EM and FM equity inflows were $10.6 bln in the week to February 24, equivalent to 0.57% of the asset class's AUM sampled by data provider EPFR Global. The $10.6 bln figure is the second highest on record, though as a proportion of AUM it is less impressive, coming up in the top 1% of weekly flow records back to 2000. The week was also the 22nd in the last 23 weeks to see net inflow to the asset class, while the latest figure doubled the previous week's $5.3 bln inflow.That all said, the data was skewed by the mammoth inflow of $8.7 bln (1.0%) to Chinese equities, the second highest on record in absolute terms and the third highest as a proportion of the country's estimated AUM. Among other markets, median inflow was a humbler 0.22%. GEM funds saw net inflow of $1.9 bln, or 0.20%, of which some $612 mln was then allocated to China. Russia lagged peers with net inflow of $80 mln, or 0.12% of sampled AUM. That included $73 mln (0.19%) inflow via GEM funds and $29 mln (0.32%) via global funds. Russia-dedicated funds saw net outflow of $24 mln (0.22%). Russia's inflow also broke down to $33 mln (0.08%) from active funds and $47 mln from passive, a reversal of the previous week's pattern. In the reporting week, the RTS declined 1.1% and the MSCI EM fell 4.7%. Two likely and not mutually exclusive hypotheses emerge. First, investors were likely buying back into the recently volatile markets after one-day declines. Second, money little tracked by EPFR - such as hedge and sovereign wealth funds, and many EMs' domestic retail investors - may have been positioning more negatively on markets than evident from publicly investable funds and ETFs. However, one week of flow data is insufficient to draw solid any conclusions.