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Bond Funds are Hot, Equity Funds are Not

The latest Morningstar European asset flow data shows investors are flocking to fixed-income but staying away from equities

Morningstar 29 May, 2012 | 4:09PM

The latest Morningstar European asset flow data for April shows investors are funnelling their money towards fixed-income funds and away from equity funds.

The data shows fixed-income attracted almost EUR 6 billion in new investor capital in April, building on a strong first-quarter for the sector. “This same preference for bonds has been evident in the US for some time,” explained Dan Lefkovitz from Morningstar’s European research team.

Meanwhile, equity funds saw a second consecutive month of net outflows in April, with roughly EUR 1 billion exiting the broad asset class. Investor sentiment has clearly soured towards Europe, with the Morningstar’s eurozone large-cap equity category suffering its fourteenth straight month of outflows in April. Overall, Europe large-cap value equity funds have lost EUR 2 billion in the year to date; and France large-cap equity funds have suffered similar outflows.

Alternatives, commodities, and convertibles funds also had cumulative outflows of EUR 1.7 billion in April.

While certain fund categories are performing poorly, the overall asset flow data shows a positive start to the second quarter of 2012, with both short- and long-term European funds attracting net inflows. In April, investors added more than €14 billion to money market funds and approximately €4.3 billion to long-term open-end funds.

“Despite market jitters, inflows to funds domiciled in Europe were positive to start the second quarter. But the funds attracting the capital are mostly investing outside of Europe, both on the equity side and the bond side,” said Lefkovitz.

For more details about which specific funds saw large inflows and outflows in April, read Lefkovitz's article: A Flight Out of Europe.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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