Year-to-date returns are 20pc from European equity funds versus 7.75pc from North America, but the US could lure investors back EUROPEAN FUNDS have delivered strong returns to Hong Kong Mandatory Provident Fund investors, the latest industry data shows. Year-to-date returns from the five European equity funds authorised for MPF investments returned 20.08 per cent to the end of September, as against just 7.75 per cent for North America. But early signs are that small investors may be turning their attention away from Europe, under the weight of concerns on the outlook for interest rates, and back to the United States. Hong Kong Investment Funds Association (HKIFA) data also shows that aggregate net inflows into emerging market funds registered for distribution to retail investors in Hong Kong totalled US$2.04billion, which accounted for 56.7 per cent of total inflows. Euro funds attracted net inflows of just US$552.87million, or 15.3 per cent of the total. Although these figures are the latest available, the data on inflows is dated (gathered in August), cautions HKIFA executive director Sally Wong. More recent anecdotal evidence, she says, suggests that since the sell-off of emerging markets in May and June, the flow of retail funds has gone in two directions. 'On the one hand we see renewed, though modest, investor interest in the emerging market. On the other hand, we see more investors moving into balanced, or more diversified, product types,' she says. Also, there seems to be a renewed interest in income-yielding products, such as high-yield or equity funds that provide regular payouts. These had fallen out of favour earlier because of rallies in equity markets. 'It seems the focus now is less on a geographical front and more on the types of features one can get from the products.' The change in sentiment, Ms Wong says, is likely the result of investor concerns over rising volatility in emerging markets and resources. 'While US interest rate hikes seem to have come to a pause, there are concerns about the housing market in the US and how that would affect the US economy and the knock-on effect on the rest of the global economy,' she says.