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Where Fund Managers Are Parking Their Money – Part 1
Perspective | 21 March 2014
By: Shane Goh
Articles (99) Profile

Morningstar recently handed out the Singapore-edition of its annual accolades in recognition of the best performing equity and fixed-income funds. Apart from brushing shoulders with award-winning fund managers, Shares Investment learned where investment money has flowed to in the past year.

In 2013, investors’ confidence revived as long-term open-end and exchange-traded funds witnessed an estimated US$976.1 billion inflow into their pockets. Coupled with asset appreciation, driven by equity performance in developed-markets, global long-term fund assets reached a record US$22.6 trillion, up more than US$3 trillion from 2012.

Great Sector Rotation
Following a tapering signal of the US Federal Reserve’s quantitative easing programme in May 2013, in fear of a rising interest rate environment, investors have fled bond funds in favour of equity funds. Equity funds collected US$567.4 billion, or 58.1 percent, of total inflows. In contrast, fixed-income funds attracted only US$134.4 billion during the year, down substantially from 2012’s US$601.7 billion.

Worldwide Estimated Net Flows To Global Broad Category Groups (US$b)

Geographically, the United States received US$471.8 billion, or 48.3 percent, of the inflow while Cross-Border and Europe absorbed US$303.2 billion and US$88.3 billion respectively, in line with a positive outlook on developed markets.

According to EPFR Global, US$28 billion flowed out of emerging markets in 2013. This trend looks set to continue with US$45 billion worth of funds exiting emerging markets for the year up to 14 March.

Gold Losing Its Shine
While equities enjoyed a stellar year of fund inflow and returns – the S&P 500 Index soared 32.4 percent – the same could not be said for commodities. In particular, gold prices tumbled 27.3 percent during 2013 as rising investor confidence reduced a need to hoard the commodity, which is often held as a hedge against inflation and disaster.

The sub-par performance in gold and outflow of funds from fixed-income products points to a potentially strong year for equities.

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

Please click here for more information about this author.

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