Talking about fund flows into emerging market (EM) Cameron Brandt, Senior Global Markets Analyst, EPFR says the tide seems to be changing for the flows into certain EM asset classes especially from hedge funds, sovereign wealth funds etc but it is not yet the mutual fund money that is coming in.
Although India has begun to see some attraction from foreign money, mutual fund redemptions still continue. "We are still seeing consistent though shrinking redemptions from the universe of emerging markets both bonds funds and emerging markets equity funds we track for dedicated India equity funds," he said.
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Below is the interview of Cameron Brandt, Senior Global Markets Analyst, EPFR with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.
Latha: The flows so far have favoured developed markets (DMs) generally and outflows from emerging markets (EMs) - even on margins is that changing, are the outflows receding in pace?
A: We primarily track it through the money moving in and out of mutual funds and what we have been seeing there is a moderation of outflows but as yet not a reversal from that pattern you mentioned in favour of developed markets. What does seem to be happening is that the big valuations gap that has opened up between emerging markets and developed markets over the past 15 months is beginning to attract some of the other money sources that we do not predict.
We are hearing of considerable interest in certain emerging markets asset classes on the part of hedge funds and sovereign wealth funds and the like. So, I think the tide is beginning to turn but it isn’t the mutual fund money at the moment for the most part you are seeing move aggressively in some emerging markets.
Latha: Can you add some colour to the kind of funds that are flowing into India. We have seen almost continuous flow of funds, a lot of money in debt and a considerable amount of money in equity. Who are the investors?
A: What I can tell you from the most part that they aren’t investors channel in the money through mutual funds. We are still seeing consistent though shrinking redemptions from the universe of emerging markets both bonds funds and emerging markets equity funds we track for dedicated India equity funds. The pace of redemptions has slowed noticeably and what we are hearing is that it is the sovereign wealth funds, the big individual investors, the hedge funds that is leading the charge to take advantage of emerging markets, they been now seen as oversold.
Reema: India dedicated funds as well are seeing a moderation in outflows. As of now once you track, we haven’t seen inflows into the India related funds?
A: No, we haven’t. The shift is coming and I am certainly not surprise that India has begun to see more attention from foreign money. It has been a very consistent pattern over the past four-five years that when India comes up to a political congestion point - the promises, economic reforms then the overseas investors position themselves to take advantage in case they actually materialise.
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