Amid another brutal day for emerging markets stocks and
, comes this and it is no surprise: Fund managers have been
reducing their exposure to the developing world.
A survey by Bank of America Merrill Lynch indicates just 13
percent of global investors had overweight allocations to
emerging markets equities this month, the lowest level since
according to Emerging Markets
Just over 250 panelists with $725 billion of assets under
management were surveyed with 200 managers, managing $578 billion
responding, Emerging Markets reported.
The results of the survey are not surprising given the dismal
performance of emerging markets ETFs this year. The iShares MSCI
Emerging Markets Index Fund (NYSE:
) is lower by more than nine percent year-to-date. EEM tracks the
MSCI Emerging Markets Index, which many money managers benchmark
their emerging markets exposure to. The Vanguard FTSE Emerging
Markets ETF (NYSE:
), the larges emerging markets ETF by assets, is also lower by
about nine percent year-to-date.
Struggles for EEM, VWO and related diversified ETFs have been
exacerbated by these funds'
significant allocations to the largest emerging
. While VWO is gently trimming its exposure to South Korea as it
shifts to the FTSE Emerging Markets Index, the ETF is still heavy
on the likes of Brazil, China and Taiwan. China, South Korea,
Brazil and Taiwan combine for about 55 percent of EEM's
spate of bad news
pertaining to Petrobras (NYSE:
) and Vale (NYSE:
) among other Brazilian stocks, the iShares MSCI Brazil Capped
Index Fund (NYSE:
) has slumped 8.2 percent this year.
In the past week alone, the iShares FTSE China 25 Index Fund
) has slid 6.7 percent. Earlier this week, the world's
second-largest economy reported first-quarter GDP growth of 7.7
percent, missing economists' estimates calling for eight percent
India ETFs have struggled as well, falling on concerns a
bloated government budget will
cost Asia's third-largest economy its
investment-grade credit rating
. Managers that responded to the survey are now a net 27 percent
underweight India, Emerging Markets reported. Benchmark exposure
to India would be in the area of 6.6 percent as EEM has a 6.64
weight to the country.
There have been signs professional managers have been reducing
their emerging markets exposure. When 13F filings for the fourth
quarter of 2012 were released earlier this year, Harvard
Management, showed significantly lower stakes in a broad swath of
emerging markets ETFs.
The largest U.S. university endowment slashed its investments
in ETFs such as EWZ and FXI
along with liquidating entire positions in funds such as the
WisdomTree India Earnings ETF (NYSE:
) and the iShares MSCI Poland Capped Investable Market Index Fund
On the bright side, money managers are increasing their
exposure to select developing economies. Survey respondents said
they have a net 53 percent overweight to Turkey and a net 47
percent overweight to Thailand, Emerging Markets reported.
Exposure to Malaysia and the Philippines was also increased this
month, perhaps underscoring the notion that
select smaller emerging markets have been leaders
That much is proven by the returns. The iShares Philippines
Investable Market Index Fund (NYSE:
), the iShares MSCI Thailand Investable Market Index Fund (NYSE:
) and the iShares MSCI Turkey Investable Market Index Fund (NYSE:
) are up an average of 11 percent this year.
The PowerShares DWA Emerging Markets Technical Leaders
), which allocates over 31 percent of its weight to those three
countries, is up nine percent year-to-date.
For more on emerging markets ETFs, click .
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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