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Equity Fund Investors Are Coming Back, but Bond Funds Continue to Dominate the European Fund Market, Morningstar Fund Flows Data Reveals

Morningstar’s latest European fund flows data shows that European investors continued to contribute new money to mutual funds in November, adding EUR 27.6 billion to long-term funds during the month. These inflows bring the total net inflows for open-end funds (excluding money market funds) to EUR 174.6 billion for the year to date. Whilst bond funds continue to dominate, equity fund investors are coming back.

Key findings from Morningstar’s report on November asset flows include:

  • Bond funds inflows reached EUR 19.9 billion to make November the second-best month on record for bond funds.* Year to date, investors have poured EUR 158 billion into bond funds, outpacing 2010’s inflows of EUR 96.5 billion.
  • Investors displayed a huge appetite for yield, piling into global emerging-markets bond funds and myriad high-yield bond categories.
  • The Morningstar global emerging-markets, global large-cap blend, and global large-cap value categories saw the strongest equity inflows in November; French and eurozone equity funds were among the most unloved categories during the month. The Morningstar EUR ultra-short-term bond category has been the most unpopular with investors so far this year, posting year-to-date outflows of EUR 10 billion.
  • Allocation funds continued their winning streak, posting net inflows of EUR 3.1 billion in November and EUR 25 billion for the year to date; flagships like M&G Optimal Income Fund, Carmignac, Newton Real Return, and Baring Dynamic Asset Allocation dominated.
  • Bond specialist PIMCO recorded inflows of EUR 29 billion in November, over two times more than runner-up AllianceBernstein.
  • Only two of the 10 fund providers with the greatest year-to-date inflows have deviated from the bond trend: Aberdeen was the main beneficiary of the high inflows into emerging-markets equity funds, and M&G is benefiting from the preference for allocation funds.

Ali Masarwah from Morningstar’s European research team comments: “Although interest in equity funds picked up in November, equity funds have had a bleak year, marked by outflows of EUR 11 billion and little potential for a strong enough December to pull them out of the red. However, year-to-date outflows are nowhere near the levels seen during the sell-offs of 2011 and 2008 when equity funds saw outflows of EUR 41.8 billion and EUR 84.9 billion, respectively.”