India, Energy, Investment Grade: What You Wanted in 2014

Risk on or risk off? Which asset classes received the most new money last year?

Flows into funds investing in India, energy projects, and good quality corporate debt hit record levels in 2014, according to new data.

A new Indian prime minister, a potential energy crisis, and increasing fears of default meant these funds received $4.6 billion, $22.2 billion, and $202 billion respectively, research from EPFR showed.

Indian equities reversed their 2013 story, recouping more than the $4.1 billion of outflows suffered in the previous year with $4.6 billion backing Narendra Modi’s plans to tackle corruption in the country’s business world.

Flows to energy funds increased almost sixfold—up from $3.8 billion in 2013 to $22.2 billion—while investment grade debt benefited from investors shunning the risk they took in the previous 12 months. This asset class turned around a $60.8 billion outflow in 2013.

Investors also pulled their highest number of assets from some previously well-loved sectors in 2014, displaying fears for their future economic trajectories. Chinese and German equities lost a record $7.6 billion and $14.3 billion in outflows over the last 12 months, although each was buoyed by new investor cash in the last quarter of the year.

Emerging market equities as a whole, which had seen record outflows of $26.7 billion in 2013, saw more assets head for the door last year. However, the lower annual $24.7 billion figure—with a $21.4 billion exit attributed to the last quarter of the year—showed some investors still believed in the sector’s story.

With an additional $184 billion, developed market equities received substantial inflows, but this figure was less than half of the $385.1 billion investors plunged into the asset class in 2013.

Liquidity was on investors’ minds towards the end of the year as a $112 billion inflow to global money market funds pulled the sector to gain overall net new money of $39.3 billion in 2014.

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