Chilean pension funds withdrew $162 million from Brazilian equities in June, bringing their investment in that asset class down to $1.34 billion and undoing the previous month’s positive inflows.
‘[Brazilian equities] fell in May so the AFPs bought them,' said Nicolás Fonseca co-head of distribution at HMC Capital, a Chilean advisory and asset management firm.
'But in June they kept falling and the pension funds probably had a stop-loss mechanism in place, so they didn’t want to hold on to that position.’
Despite their retreat from Brazil, Chile’s six AFPs bought into Latin American equities in June as they invested a net $303.4 million, according to a report by HMC that collates data from Chile’s pension regulator.
As part of that investment, the AFPs also entered Argentina last month, pumping $8.4 million into the $20.9 million iShares MSCI Argentina and Global Exposure ETF, which was launched at the end of April, according to the report.
In June, European equities continued their positive run among the AFPs, getting a net investment of $777.5 million and ranking as the top-gaining asset class that month.
With $1.74 billion in net inflows since January, European equities ranked as the asset class with the largest gain among the AFPs' foreign investment portfolios.
‘Last month Europe fell and they took advantage of the fall to invest even more. Both value and growth fell but the AFPs bought everything, even small cap,’ Fonseca said.
Meanwhile, the pension funds continued their multi-month retreat from US equities, though their $397 million withdrawal in June wasn’t as sharp as their $838 million May outflows. It was mostly due to continuing concerns about lofty valuations and rising interest rates, Fonseca said.
Most popular funds
Last month, the Allianz Euroland Equity Growth ranked as the most popular fund with $253.7 million in net inflows. The Gam Star Continental European Equity ranked second with $176.4 million and the BNP Parvest Japan Equity Small Cap third with $125.8 million.
On the fixed income front, the AFPs continued to add to their emerging market debt exposure, investing a net $355 million and bringing their total allocation to $7.8 billion.
They also pulled a net $63.8 million from high yield, with US high yield alone suffering $55.4 million in outflows.
In that context, the Man GLG Global Emerging Markets Debt Total Return received the most net inflows with $151 million, the JP Morgan Global High Yield Bond second with $79.5 million and the Julius Baer & Co. Local Emerging Bond third with $87.7 million.