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The Most-Loved Fund Categories

ASSET FLOWS: Investors fell in love with global emerging-markets equity funds in the first month of 2013

Ali Masarwah 28 February, 2013 | 4:08PM

Investors poured a record amount of money into long-term funds in January as concerns about economic and market risks faded in people's minds. Long-term funds posted record inflows of €45.7 billion in January, the highest level seen for European funds on record. (Morningstar asset flow data at the industry level begins in 2007.)

More of the Same, Please!

Turning to the most-loved fund categories, global emerging-markets equity funds have taken the lead, enjoying hefty inflows of €4.4 billion in January. This marks a continuation of last year’s trend and brings total 12-month inflows into emerging-markets equity funds to €19.4 billion. 

The Morningstar Asia Pacific ex-Japan equity and China equity categories also had a field day in January. These funds saw the highest inflows of any single month on record, receiving €1.6 billion and €1.0 billion, respectively. This suggests that European investors are pinning their hopes on the return of growth to the Chinese economy this year after disappointing growth (and poor equity performance) in 2012. (At the time of writing in February, the latest macro indicators such as the HSBC PMI Index do not support these hopes.)

Turning to bond funds, continuity also prevailed with higher-yielding categories receiving a gush of fresh money. The heterogeneous “other bond” category, which includes flexible, high-yield, and target maturity funds, took in €3.5 billion; followed by “global emerging markets bond – local currency” funds, which collected €2.5 billion. Meanwhile, the hard-currency-denominated “global emerging markets bond” funds welcomed €2.1 billion. 

Allocation funds also enjoyed their share of investors’ money in the first month of 2013 with cautious and flexible EUR funds collecting the lion's share of inflows into mixed-asset funds.

The top-selling fund was the Silver-rated M&G Optimal Income fund (Analyst Research), with most of the inflows targeting the EUR share class of this cautious allocation product.

Top Morningstar Categories by January Inflows

(Click image to enlarge.)

UK Categories Are Falling Out of Favour: The Unloved Fund Categories

Investors continued to shun--albeit to a lesser degree--guaranteed funds, France and Germany large-cap equity, and EUR government bond short-term funds.

A more recent phenomenon was the seemingly sudden flight of investors from UK equity funds--a shift that might gather pace, as economic data suggests a downturn of the British economy. The three most unloved Morningstar categories in January were UK large-cap blend equity, which suffered outflows of €1.4 billion, and UK equity income funds and GBP corporate bond funds, which suffered redemptions of €700 million and €605 million, respectively.

Scottish Widows, Liontrust, and HSBC were hit the hardest on the UK equity side, while M&G and Schroders suffered most on the bond side.

The Bottom 10 Morningstar Categories by January Outflows

(Click image to enlarge.)

To learn more about January 2013 fund inflows, read "Record Inflows into Long-Term Funds".

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About Author Ali Masarwah

Ali Masarwah  is the editor of Morningstar.de in Germany.