Fund Buyer Index

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Quarter 1 - 2018

Global emerging market (GEM) equities have been one of the most popular asset classes among pan-European fund selectors since Q3 2015 – but demand dropped dramatically during Q2 2018.

EMERGING MARKETS DEMAND SLUMPS TO THREE-YEAR LOW

According to Last Word Research, the asset class has now moved into neutral sentiment territory after being in positive territory for almost three years.

In Q1 2018, GEM equities were the second most popular strategy out of 22 asset classes for fund selectors to purchase over the next 12 months, however, in Q2 GEM equities dropped to 11th out of 26 asset classes.

Over the 12 months to June 2019, just 26% of fund selectors are looking to buy GEM equities; 52% want to hold; 10% to decrease (10% of respondents did not use the asset class).

GEM equities: net sentiments

Source: Last Word Research

The MSCI Emerging Market index has been on a downward trajectory since the global market sell-off in January 2018.

MSCI Emerging Market index year to 23 July 2018

This sentiment has been mirrored by the latest Thomson Reuter Lipper European fund flows report that found that GEM equity funds suffered the highest net outflows apart from money market funds in June at €3.4bn, followed by global USD hedged bonds at €2.7bn, European equities at €2bn, global high yield bonds at €1.4bn, and absolute return medium EUR at €1.8bn.

OUTFLOWS FOR EUROPEAN FUNDS

US SENTIMENT JUMPS

According to the Lipper report, the top sector in terms of inflows was US equities (€2.3bn), again mirroring Last Word Research’s latest data that found that US equity sentiment jumped into low neutral territory after being in negative territory since Donald Trump won the presidential election in November 2016.

Mixed-asset USD balanced funds followed at €1.5bn, then mixed-asset GBP balanced at €1.4bn, alternative market neutral equities at €1.4bn, and global equities at €1.3bn.

According to Last Word Research, the asset class has now moved into neutral sentiment territory after being in positive territory for almost three years.

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