Assets of India-dedicated funds jump to $2.8bn

Dedicated India funds continued to attract fresh investment this year. These funds raked in $96 million of fresh investment in the week ended February 18, taking the total inflows to around $612 million so far this year, according to the US-based EmergingPortfolio.com Fund Research (EPFR).

EPFR is a research house and tracks money movements in and out of global equity funds.

The fresh influx of money in the week ended February 18 has increased the total assets with these India-dedicated funds by one-third to $2.8 billion.

"Investors continue to pump in money into India funds despite a 0.5 per cent decline in the MSCI India index this year as domestic investors appear to be taking profits and selling off blue chip stocks to build cash in tune with the spate of initial public offerings set to hit the markets in the coming weeks," said Brad Durham, managing director, EPFR.

Strong inflows since the beginning of the year have boosted the aggregate assets with emerging market equity funds to over $100 billion.

The 672 dedicated emerging market equity funds, tracked by EPFR on a weekly basis, exceeded $100 billion in assets for the first time ever, finishing the week ended February 18 with assets of $102.4 billion.

The funds, which include diversified global emerging market (GEM) equity funds, Asia (excluding Japan), Latin America and EMEA regional and country funds, received a net $1.17 billion inflows from investors for the week ended February 18. This was the largest amount of inflows into these funds since EPFR began tracking them weekly in mid-2001.

In addition, Japan equity funds saw the strongest week of inflows this year while investors have rediscovered Europe equity funds, perhaps in part as a way to play an appreciating euro against the dollar.

Interestingly, inflows were positive in all the developed market equity funds tracked by EPFR in the latest week and, with the exception of two weeks of outflows out of European funds this year, inflows have been positive in every week so far in 2004.

These fund categories include US, international/global, Japan and western Europe equity funds, which received combined inflows of $1.19 billion last week.

"There is considerable amount of debate right now about whether the strong fund flows of late are a bullish signal of liquidity being injected into markets that will stimulate future equity performance, or are a bearish indicator that investors are simply chasing performance," said Brad Durham.

"The flows we are seeing appear to be going largely into funds open only to institutional investors such as public and private pension funds. These investors tend to make long-term asset allocation decisions based on a range of fundamental factors," he added.

International/global equity funds, which invest in both developed and emerging markets, received $349.2 million during the week, bringing their net inflows in the current year to date to $4.7 billion, or 2.2 per cent of total assets.

The US equity funds tracked by EPFR took in a net $315 million during the week, bringing their year-to-date inflows to $4.7 billion, or one per cent of total assets.

The GEM equity funds category led the dedicated emerging market equity funds with a $594.8 million of inflows in the week ending February 18.

But $306 million alone was placed with a single Luxembourg-registered GEM equity fund that is likely to have come from a European-based source of capital such as a pension fund or endowment.

Asia (excluding Japan) equity funds continue to be the favorite fund category in total dollar terms. These funds reversed two consecutive weeks of outflows by drawing in $406.9 million during the week and $2.2 billion year to date.