Redemptions at financial funds hit a three-year high on rising default risk for Greece, EPFR Global reports.
Financial funds took a beating last week as redemptions hit a three-year high of $910.7 million on rising concerns over the Greek debt crisis, according to the latest report from EPFR Global, which provides fund flows and asset allocation data to financial institutions around the world. Huge trading losses at JPMorgan and uncertainty in the Spanish banking sector also influenced the redemptions.
“With a leaderless Greece seemingly circling the drain leading to exit from the Eurozone, investors spent the second week of May looking for asset classes and countries that offer some degree of protection if the currency union begins to unravel,” said EPFR Global in a statement. The Japan and German equity fund sectors both attracted $750 million in the week ending May 16, while the U.S. bond fund sector took in more than $4 billion for the fifth consecutive week. Retail investors also showed renewed interest in U.S. equity funds, though redemptions by institutional investors led to year-to-date outflows of more than $10 billion.
Emerging market equity funds were also affected by the “latest spike” in risk aversion, said EPFR Global. Outflows from emerging market equity funds totaled $2.26 billion for the week ending May 16, marking the second consecutive weeks of year-to-date highs as investors “extended a redemption streak” begun at the end of February.
“The political deadlock in Greece and fears that China’s economy is stumbling towards a hard landing are sapping investors’ enthusiasm as they pencil in weaker commodity prices and a tougher environment for emerging markets exporters,” according to an EPFR Global statement.
High net worth Americans – those with investable assets of $5 million to $25 million - are becoming increasingly sensitive to the global economic environment, and are changing their investment strategies in response to the European Debt Crisis, according to recent studies by Millionaire Corner, which tracks the attitudes and behaviors of wealthy investors.
Nearly three-fourths of high net worth individuals surveyed late last year said the sovereign debt crisis in Europe has affected or will affect their investment strategies, and 70 percent surveyed in the first quarter of 2012 said they “pay more attention” to the global economic situation because of its growing impact on their wealth.
According to EPFR Global, sector funds with a “defensive” reputation, such as consumer goods, health care and biotechnology, real estate and utilities are attracting investors in the current economic environment. All posted solid inflows last week