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Risk Appetite is Back, Latest Morningstar European Fund Flows Data for January Reveals

Morningstar European fund flow data for January shows a positive start to 2012 for the European fund industry, with investors adding Euro 13 billion in new assets to long-term European-domiciled funds in January 2012.

Key findings from a Morningstar research report released today include:

  • Investors piled nearly Euro 7 billion into fixed-income funds in January.
  • Investors demonstrated a hunger for yield, with Morningstar’s fixed-income categories of EUR High Yield Bond, EUR Corporate Bond, and USD High Yield Bond attracting a combined Euro 6 billion in the first month of the year.
  • Equity funds saw their first positive month since May 2011 with more than Euro 3 billion in inflows. Global emerging-markets funds had their strongest inflows since April 2011.
  • Aberdeen Emerging Markets—rated “Gold” by Morningstar analysts—achieved the greatest monthly inflow among funds in the global emerging-markets category, with Euro 600 million in new assets.
  • Templeton Global Bond suffered its fifth consecutive month of outflows in January. Investors redeemed more than Euro 500 million during the month, and the fund’s Morningstar Investor Return* (money-weighted) was significantly below the fund’s total return.
  • Money market flows benefitted two of France’s top three largest funds, with BNP Paribas enjoying its best month since March 2010, and Amundi its best since May 2011.
  • Passive funds had a strong month, as Euro 1.2 billion flowed into index funds.

Dan Lefkovitz from Morningstar’s European research team comments:

“Buoyant markets have brought investors back into funds. Renewed appetite for risk and a sharp hunger for yield are evident. But the case of Templeton Global Bond is a sign that investors too often have a habit of buying high and selling low. Morningstar’s Investor Returns calculation shows that many of the fund’s investors have not captured its stated total return.”

* Morningstar’s investor return calculation is a money-weighted return measure that expresses the average return of the unit of each share class’s base currency over the period indicated. The difference between Investor Return and total return indicates the extent to which investor outcomes differ from advertised fund returns.