Russian equity funds see net retail flows return

Russian equity funds have finally seen some positive flows, with $51m of new retail money flowing in last week, versus outflows of $42m the previous week, according to Troika Dialog’s fund flow monitor. The inflows put an end to 11 straight weeks of redemptions and may signal the beginning of a positive trend.

It is particularly encouraging, Troika says, that only $15m has gone into exchange traded funds (ETFs), with the rest coming from allocators with a longer investment horizon. Investors are satisfied that the low valuations of Russian equities reflect the risks of investing in this relatively volatile market and are beginning to see the domestic macroeconomic environment as relatively stable.

But Troika cautions that it is too early to rejoice, since the back to back flows into emerging market equities are positive for the first time since March, which can hardly be considered a trend. Analysts are concerned that it is too early to be optimistic at this stage.

Emerging market ETFs as a whole have attracted positive flows, with $750m added in the last week. Troika’s analysts believe these flows “tend to reliably foretell retail fund flows” and expect more money to go into Russian equities in the coming weeks.

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