EPFR Debuts Flows Allocation Models

Boston-based fund flows data vendor EPFR Global has released the country, region and sector fund flows and asset allocation models it began developing last year (IMD, May 2, 2011), that overlay EPFR’s data over benchmark indexes and other factors to help investors achieve improved investment returns, and allow the vendor to expand its client base to new market segments.

“When you add flows to industry-standard ways of valuing stocks, such as price-to-earnings and price-to-book, then it’s like two plus two equals five,” says Simon Ringrose, managing director of sales at EPFR. “So we mix them together… and give investment managers a weighting for different countries, which helps them to outperform their own weightings.”

The reports generated by the models also break down the type of investor responsible for fund flows, and compares their performance to benchmark indexes, since if a fund manager is performing below the benchmark, it will create buying pressure, and vice-versa. “So it helps to know if funds are above or below the benchmark,” Ringrose says. “It’s also important for end-users to know who is getting in and out of a region, as global equity funds control a lot of money—so you want to know when they are entering or leaving a sector or region.”

Investor Interest
“We’re seeing more analysts and portfolio managers paying more attention to country and sector timing, as well as individual investors,” Ringrose says, since even the best company in a country will not deliver the best returns if investors enter and exit the stock at the wrong times. As a result, the new data is giving the vendor an opportunity to expand outside its core base of hedge fund clients. “We’re realizing there is a bigger market of smaller firms, wealth managers and banks who are interested in this but need some coaching in how to use it.”