In spite of a slowdown in China — and the economies of nations like Brazil that rely heavily on the export of commodities to China — institutional investors and their advisors remain bullish on emerging market equities.

Enthusiasm for this market has pushed up net inflows into emerging market equities from institutional investors and propelled this market category to number one in investment database research, according to data from Marietta, Georgia-based financial data firm eVestment.

During the first quarter of this year, institutional investors were responsible for $9.3 billion in net inflows into assets in emerging market equity (all cap equities), one of 369 categories used by eVestment to segment 53,000 investment vehicles around the world.

eVestment Emerging Mkts All Cap Equity:
Gross Inflows, Gross Outflows and Net Flows
Chart 1
Source: eVestment


The $9.3 billion first quarter surge is more than double the pace of the $4.1 billion net inflows in the fourth quarter of 2012 and is the second highest quarterly inflow of funds into emerging market equity (all cap equities) since the beginning of the recovery. Quarterly net inflow peaked at $11.0 billion in the fourth quarter of 2010.

Not all emerging market equity categories attracted significant new fund flows from institutional investors. For example, emerging markets passive equity received $707.4 million of net inflows in the first quarter. There was even less – $39.3 million – in net inflows into emerging markets small cap. And emerging market large cap assets had net outflow of $2.8 billion to institutional investors.

Favorable views of equity segments in emerging market equities contrasts with a decidedly more skeptical view of equities on a global basis. In the first quarter there were net outflows of $3 billion in equity assets from institutional investors on a global basis, down from $38 billion in net outflows in the fourth quarter of 2012, according to Rich Donnellan, product manager at eVestment. For all of 2012, there was a net outflow of $120 billion from global equity investments.

The outflow of funds from equities on a global basis “simply means investors are saying that the valuations across equity markets are not something they feel like putting a lot of money towards,” says Peter Laurelli, vice president of research at eVestment.

Emerging market all cap equities also became the favorite search category during April, according in eVestment, which publishes a monthly report on search activity. This category received an average of 30.3 searches per investment vehicle tracked in the Advantage database.