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The
outflows were the second largest in five years, exceeded only by
the $22 billion withdrawn by sovereign wealth funds (SWFs) in
the third quarter of 2015, when oil prices tumbled around 25
percent.
Peter Laurelli, global head of research at eVestment, which
collates data from 4,400 firms managing money on behalf of
institutional investors, said SWF flows to external money
managers appeared "highly correlated" to global commodity
prices, particularly oil prices.
"Continued redemptions could be a sign SWFs expect continued
pressure on commodity prices in coming quarters," he said.
The second-quarter data also revealed the highest proportion of
external managers reporting SWF net outflows, at 72 percent,
compared with just 28 percent reporting net inflows.
The depth of the sell-off reflects the fact that countries such
as Russia and Saudi Arabia, which are heavily reliant on oil
exports to generate income, have raided their rainy day funds to
close budget gaps.
The eVestment data showed that over $7 billion was withdrawn
from U.S. equities mandates, with passive S&P 500 equity funds
bearing the brunt of the selling. In total, equity funds lost
$8.6 billion.
This selling occurred despite strong gains in global stocks with
the S&P 500 up 7 percent this year to record highs, while the
benchmark world equity index is up 4 percent.
Overall, fixed income funds lost $7.5 billion, with some $3.2
billion pulled from U.S. mandates and $2.7 billion from global
strategies.
Laurelli highlighted the move away from inflation-sensitive bond
products with accelerating redemptions from U.S. and global
products, which lost $1.5 billion and almost $3 billion
respectively.
"This could be a sign there is lack of faith from the SWF
community of the effectiveness of global central bank monetary
policy to stimulate inflation, or for continued concentrated
efforts to do so," he said.
Even emerging market debt funds, which have attracted other
investors in recent weeks because of their higher yields,
suffered SWF redemptions of just under $1.6 billion.
Asia Pacific equity was one of the few areas to see modest
inflows, attracting $748 million. This was mainly driven by net
inflows of $757 million into Malaysia equity funds. Overall EM
equity mandates lost just over $1 billion.
"It is apparent that SWFs continue to allocate to external
managers for niche strategies," Laurelli said, noting three
consecutive quarters of growing allocations to Malaysian equity
and consistent allocations to EM infrastructure.
(Reporting by Claire Milhench Editing by Jeremy Gaunt)
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