Russian ETFs see inflows while mutual funds lose out

Troika Dialog’s latest fund flow monitor shows that while Russia grabbed a significant share of net inflows into emerging market retail funds over the past week, most of the money invested in that country went to ETFs.

This could be both a good and a bad sign: although traditional investors have often followed ETF allocators, the latter are usually also more short-term in their strategies.

Russian ETFs have seen inflows of $232m, while traditional funds have actually lost $21m of money, the monitor suggests. Dmitry Mikhailov, fund manager for Russian equities and balanced funds at Renaissance Asset Managers, said: “ETFs are a competition threat to the Russian mutual fund industry. They are more efficient and cheaper, while average returns are roughly the same.”

Emerging market (EM) funds in general have been in favour with ETFs investors in the past week. Of the total inflows of $1.5bn into EM funds, $1.2bn was invested through ETFs.

The inflows are a surprise, considering the weak market conditions, Troika Dialogue said, adding that they could simply signify a bet on a bounce inspired by expected actions from the European Central Bank and the US Federal Reserve, in which case a reversal may well be expected next week.

Troika said: “If the ECB does not quickly reassure investors that it can deliver an effective plan to prevent the debt crisis from escalating then all of that ETF money will hit the exit, and soon.”


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