Investors flee cash funds for North American equities, says Skandia

The first four months of 2012 have seen international investors withdrawing cash funds, tempted by valuations in North American equity markets, analysis by Skandia has shown.

Skandia International’s analysis of money movements within its offshore products found that cash and money market funds accounted for nearly half of outflows since January through to the beginning of May. More than 7% of outflows were from commodities, specifically gold funds.  

Investors appear to be tempted by the more resurgent North American economies, with US and North American funds taking in a third of new investments over the first four months of this year. This behaviour mirrors the results of the Skandia International adviser confidence barometer survey in Q1, which found that North American equities were most likely to be favoured by advisers for their clients’ portfolios over the next three months.

A further 28% of inflows went to to global fixed interest funds. Latin America and Russian equities, and UK and emerging markets fixed interest funds also saw positive inflows. However, despite robust performance in Asian markets, Asian equities made up 12% of outflows.

Phil Oxenham, marketing manager at Skandia International, said: “The findings are interesting and illustrate that the wall of cash built up as a result of the nervousness investors have been experiencing in recent months is, as predicted, now being directed into equities.  

“The ongoing and potentially worsening turbulence in the Eurozone is perhaps making investors feel that North American equities may be a safer option – not that an ocean is enough to remove the risk of global contagion completely.  

“Clearly the nervousness has not yet totally subsided, as a significant proportion of new money is still being invested into fixed interest funds, but this also demonstrates that clients are becoming increasingly aware about the importance of diversification and how it can help keep portfolio risk in check.” 

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