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Morningstar - Tapering Delay Drives European Fund Investors to Risky Assets

Investors poured into equity funds in October, Morningstar’s latest European fund flow data reveals. With net inflows of EUR 15.3 billion, equity funds saw their greatest monthly inflows since January. Allocation funds also remained in high demand, with net inflows of EUR 7.8 billion, as did alternative funds, which welcomed EUR 1.7 billion. Commodities and bond funds, on the other hand, suffered net outflows of EUR 419 million and EUR 988 million, respectively. In all, long-term funds took in net EUR 22.3 billion in October, the highest level of inflows seen since July.

Further key findings from Morningstar’s European asset flows report for October:

  • Funds in Morningstar’s European large-cap blend equity category received net inflows of EUR 2.4 billion, the highest in any month since Morningstar began tracking European industry-level fund flow data in 2007.
  • USD high-yield funds remained in demand, while global emerging-markets equity funds saw their first month of positive net inflows since May.
  • Bond funds represented six of the 10 least-loved categories, ranging from EUR government bond funds to USD, GBP and EUR corporate bond offerings.
  • Europe´s largest open-end fund, Templeton Global Bond, which has a Morningstar Analyst Rating of Silver, suffered outflows of EUR 579 million. October was the fifth consecutive month of outflows for the fund.
  • Neil Woodford’s Invesco Perpetual Income suffered redemptions of EUR 1.1 billion, the largest outflows seen by any long-term open end fund in Europe in October. Woodford´s second-largest fund, Invesco Perpetual High Income, lost EUR 574 million.
  • Through October, BlackRock has the highest year-to-date net inflows of all providers, at EUR 22.8 billion (this data does not include iShares ETFs).

Ali Masarwah, from Morningstar’s fund flows research team comments: “Buoyant equity markets, a continued decline in volatility and a slight tightening of corporate credit spreads bore witness to the exultant mood of investors in October, as equity funds saw their strongest month of inflows so far this year. Inflows for long-term funds, however, still remain well below the levels seen prior to the Federal Reserve’s tapering scenario, which unleashed an indiscriminate selling spree in the third quarter of 2013.”