Fund investors more positive on stocks, but appetite for bonds still dominates - latest Morningstar fund flows data reveals

25 October 2012

With policy makers and central banks striving to ease the pain for troubled eurozone economies, European fund investors may be shrugging off the risk of Euro implosion, according to Morningstar’s latest European fund flows data. Morningstar fund flows data for September suggests that investors are increasing their exposure to risky assets, and not just within fixed income. In September, equity funds received net inflows of EUR 1.91 billion, their first positive month since February. This ends a long period of disconnect between fund investor behaviour and equity market performance.

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

  • Long-term funds welcomed EUR 20.87 billion in September, bringing the total for the third quarter to EUR 54.14 billion; money market funds suffered net outflows of EUR 18.3 billion in September.
  • Fixed-income funds took in new assets of EUR 15.9 billion in September; third-quarter inflows of EUR 53.24 billion was the best quarterly intake for bond funds since at least 2007.
  • EUR diversified-bond and UK government-bond funds were out of favour, shedding net EUR 689 million and EUR 667 million, respectively, last month.
  • Outflows from Templeton Global Bond—Europe’s largest bond fund—slowed, as performance for the Silver-rated EUR 33 billion fund rebounded.
  • Global emerging markets equity posted the highest net inflows among Morningstar’s equity categories, gathering EUR 1.42 billion in September and EUR 1.75 billion in the third quarter; Aberdeen Global Emerging Markets Equity fund—rated Gold by Morningstar—lead the category with year-to-date inflows of EUR 1.61 billion.

Ali Masarwah from Morningstar’s European research team comments: “European fund investors have seemingly begun to embrace the idea that the Euro may not implode after all. The comeback of equity funds in September suggests that investors are finally reacting to buoyant equity markets and the announced Outright Monetary Transaction programme of the European Central Bank. That said, the continuing bond fund glut in September and the sizable flows into high-yield bond funds over the past months indicate that markets are still distorted by the monetary policy of the ECB and the persistent eurozone crisis.”

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