EU, US action boosts sentiment for Russia funds

The actions of Europe’s Central Bank and the US Federal Reserve earlier this month have boosted investor appetite for Russia’s mutual funds.

Last week saw inflows of $92m into Russia single country funds, according to EPFR’s global report. Allocation to the country within global emerging market portfolios has also increased.

The total allocation to Russian equities last week was the second highest this year, which has been marked by cautious investment strategies and low appetite for Russian assets.

Yet the “new star” in the emerging market space is the first constituent in the BRIC acronym – Brazil. Its country specific funds have attracted $803m last week, after consistent outflows for the first seven months of the year.

Most of the inflows into Brazilian funds came through exchange traded products, which have been drawing most of the money going into emerging market equities so far this year.

Russia’s Troika Dialog comments: “Retail fund investors, especially ETFs, have adopted a much more positive market outlook than direct investors, which has generally been the case since early summer.”

Troika also notes ETF investors are “clearly betting on much higher market levels by year end and see risk assets, including EM equities, at the top of the performance table.”

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