SkyBridge Sees Up to $50 Billion in Emerging Outflows

Anthony Scaramucci’s SkyBridge Capital says the rout in emerging-market stocks will deepen, pitting the firm against calls by BlackRock Inc. and Templeton Asset Management that shares are cheap and will lure buyers.

Developing-nation equities are set to lose another $25 billion to $50 billion in net outflows over the next year, said Troy Gayeski, a partner and senior portfolio manager at SkyBridge. While SkyBridge has been considering buying emerging-market stocks since the third quarter of 2012, the firm hasn’t found prices attractive enough yet, he said.

“Every time we look at it, it’s just too early,” Gayeski, who oversees $6.4 billion at SkyBridge, said in a telephone interview from New York on Feb. 12. The firm last held developing-nation stocks in 2010, he said. “You have to wait for the cycle to play out.”

Emerging-Market exchange traded funds in the U.S. had about $100 million of outflows since the MSCI Emerging Markets Index reached this year’s low on Feb. 5, while foreigners pulled $892 million from bourses in South Korea, India and Brazil, data compiled by Bloomberg show. BlackRock’s Larry Fink and Templeton Asset Management’s Mark Mobius are among managers of more than $7.7 trillion who say the rout is making share prices look attractive.

The MSCI Emerging Markets Index tumbled 8.6 percent this year through its low on Feb. 5 as developing-nation stock funds tracked by EPFR Global and Morgan Stanley (MS) recorded more than $15 billion of withdrawals. Shares sank as Chinese manufacturing indexes dropped, central banks from India to Turkey raised interest rates to support their currencies and the Federal Reserve pushed ahead with plans to reduce stimulus. The gauge dropped 0.6 percent to 947.19 at 3 p.m. in New York.

‘Papered Over’

The Fed’s stimulus partly “papered over” the reality of emerging markets, which will keep sliding longer than they should after having outperformed for years, Gayeski said.

BlackRock’s Fink, whose firm is the world’s largest money manager with $4.3 trillion, said developing-nation equities are attractive because of low valuations relative to the countries’ potential growth rates. He spoke in an interview with Charlie Rose that aired on PBS on Feb. 11. Mobius, who oversees more than $50 billion, said on Bloomberg Radio the same day that the selloff is approaching its end.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Samuel Potter at spotter33@bloomberg.net

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