Investors plow cash into money market funds-EPFR

NEW YORK, March 28 (Reuters) - Investors pumped money into money market funds in the latest week, prizing flexibility above all else in the current financial turmoil, data from Boston-based fund tracker EPFR Global showed on Friday.

In the week ended March 26, a hefty $17.3 billion flowed into money market funds, while traditional safe-havens such as global bond funds had outflows of cash. Stock funds in general also lost cash to redemptions.

Money market funds have taken in a net $250 billion since August of 2007, Cameron Brandt, global markets analyst at EPFR, told Reuters in a telephone interview.

"The move in the first quarter into money market funds wasn't the usual flight to safety. The global bond funds had money come out of them, which is unusual in a period of heightened risk aversion," he said.

"The reason seems to be that there is a feeling the assets they have don't match up with the inflation people are expecting over a five-year window," Brandt said.

In the latest reporting period, global bond funds had net outflows of $375.4 million. U.S. bond funds in total had a net outflow of $433.8 million.

Investors did, however, put a net $301.7 million into U.S. municipal bonds.

In the first quarter of 2008, more cash flowed out of equity funds than flowed in during the first quarters of 2007 and 2006 combined.

In equity markets, EPFR data showed a net outflow of $97.9 billion in this year's first quarter. In the first quarter of 2007, net inflows totaled $18.9 billion and they were $48.9 billion in the first quarter of 2006.

All major geographic regions had outflows of cash in the latest week except for Global Emerging Market Funds, which took in $199.2 million.

Financial sector funds showed surprising strength as they took in a net $6 billion in cash even as the bankruptcies and sub-prime mortgages ravaged the industry.

"Money markets are one sector people might use in order to jump back into the markets quickly. But the other indicator people have in mind in terms of finding a bottom is that financial funds posed the largest sector inflow in the first quarter," said Brandt.

U.S. equity funds had a net outflow of $9.5 billion. Among the sector funds, commodity funds had outflows of $671 million, while utilities had inflows of $142 million.

EMERGING MARKETS

In emerging markets, debt funds posted a second week of total outflows. A consistent pattern of money flowing into local currency bond funds and out of U.S. dollar-denominated funds was maintained.

Investors took a net $124.7 million out of hard-currency emerging market debt funds versus a net inflow of $31.7 million into local currency bond funds. Blended emerging market bond funds had a net inflow of $28.4 million.

One analyst expressed alarm that local currency bond fund inflows slowed from $253.4 million in the prior week.

David Spegel, global head of emerging market strategy at ING in New York, said the size of local currency fund net inflow was "troubling."

"Local currency flows have provided the main support for emerging market debt vehicles in recent months, which would otherwise have recorded net outflows from the asset class," he said. (Reporting by Daniel Bases; Editing by Dan Grebler)

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