Chilean pension funds’ retreat from Japanese equities reached new heights in October as the six AFPs collectively pulled $262.5 million from that asset class.

The pension funds have been tapering their new net investment into Japanese stock funds since at least June, according to monthly reports by Chilean financial firm HMC Capital dating back to June this year.

Year to-date-inflows into the asset class stood at a net $547.3 million as of the end of the second quarter, but after a series of monthly withdrawals and after October’s sharp exit, the figure decreased to a net $186.1 million.

However, the total dollar amount the AFPs have in Japanese equities grew from roughly $7.06 billion in June to $7.37 billion at the end of October.

The growth in total assets is likely due to market appreciation, as Japan's key index, the TOPIX, rose 11% between June 1 and October 31. Japanese equities have had a good run this year due to higher than expected earnings and other factors, according to a BlackRock report.

Meanwhile, in October the pension funds pumped a net $322.6 million into Latin American equities, bringing total year-to-date net investment in that asset class to $1.67 billion.

The AFPs also invested $208.8 million into Brazilian equities last month, all through the iShares MSCI Brazil Capped ETF, pushing inflows to a net $784.4 million for the year.

‘In Latin America, net flows continued to be positive even though it was one of the few regions worldwide with negative returns in October,’ said HMC’s co-head of distribution Nicolás Fonseca.

In October, the AFPs also continued their exodus from US equities by pulling a net $990.6 million, bringing their net exit to $4.9 billion.

Chilean pension funds also invested a net $294.4 million into fixed income strategies last month, with 74% of that figure going to emerging market debt.

‘As has been the trend this year, emerging market debt continues to be the favorite, and with the net increase of $218 million in October, this asset class has seen an increase of approximately $2.6 billion in 2017,’ Fonseca said.

Top funds

In October, the top three equity funds were the Investec GSF Asian Equity with $246.8 million in net flows, the iShares Core MSCI Emerging Markets ETF with $220 million and the iShares MSCI Brazil Capped ETF with $208.8 million.

On the fixed income side, the AQR Style Premia High Yield Credit Ucits came first with a net $99.9 million, the Ashmore Emerging Markets Short Duration second with $88.4 million and the Robeco High Yield Bonds with $55.7 million.

In total, the six AFPs had $74.7 billion in international investments as of last month, according to HMC's report. Total assets across local and international investments reached $203 billion as of the end of October, mainly due to solid returns from equities, Fonseca said.