CAMBRIDGE, Mass. — Emerging markets bond funds have seen an exodus of capital in recent weeks despite posting positive returns.
According to figures compiled by Emerging Portfolio Fund Research Inc., Cambridge, emerging markets bond funds recorded fund outflows of $69.1 million in the week ended Aug. 6 — bringing total inflows for 2004 to this fund sector to just $192 million.
Brad Durham, managing director of the Cambridge, Mass.-based firm, which tracks about 7,000 international funds, said, emerging markets "debt prices are rising, but investors are not confident on future performance of the asset class. Because institutions and sources of capital — pension, endowments, etc. — are making longer term decisions, flows can be persistently negative even though EM debt is doing well now that the consensus is turning toward a more gradual tightening on the recent weak economic data."
But the emerging markets bond fund loss has been a gain for global bond funds. Global bond funds include both emerging markets and developed countries. As tracked by EPFR, funds in this sector had a net inflow of $46.6 million for the corresponding week. This marks the eighth week in the last 10 that posted a net gain for the 259 funds tracked in the sector.
Global bond funds will continue to benefit from continued outflows from emerging markets bond funds, said Mr. Durham: "Generally, the sources of capital are likely to still follow the general trend of reducing exposure to EM debt even though in the short term, EM debt may rally due to the changing interest rate picture."
But Mr. Durham said that when looking at the longer-term picture, he wouldn't be surprised if funds return to the emerging markets sector as investors recognize the relatively stable health of the credits in countries such as Brazil and Russia — both of which are enjoying strong growth and improving fiscal position.
Mohamed El-Erian, managing director and portfolio manager for the $1.3 billion PIMCO Emerging Markets Bond Fund, agreed. Even with rising oil prices and the likelihood that interest rates will continue to rise, he said, at "the general level, emerging markets benefit to the extent that both developments reflect a sustained pickup in global aggregate demand."
Mitchell tapped for Tremont investment post in London
LONDON — Jim Mitchell was named head of investment management for Europe by hedge fund-of-funds firm Tremont Capital Management. The position is new.
Mr. Mitchell will oversee a three-person unit in London that performs hedge fund manager evaluation, selection and monitoring, and develops customized hedge fund-of-funds portfolios. He also will supervise the firm's London-based client relationship management unit.
Rupert Allan, managing director of Tremont's London office, said the firm intends to further expand its institutional business in Europe and Asia, and more analyst and relationship management hires are likely.
Mr. Mitchell was vice president of investment relationship management for global clients in the firm's Rye, N.Y., headquarters. Most of those duties will be moved to the London office, and he will not be directly replaced in the United States, said Cynthia Nicoll, senior vice president, director of investment management.