2012: A Year of Bond Fund Hegemony

ASSET FLOWS: The flow of money in and out of funds in 2012 represent a bond boom by default, says Morningstar's Ali Masarwah

Ali Masarwah 29 January, 2013 | 10:22AM
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The books are closed on 2012 and despite the challenging macroeconomic environment, European investors were still enthusiastic for long-term funds. They added EUR 26.6 billion in December 2012, bringing total net inflows to long-term funds to EUR 204.6 billion over the course of 2012. Still, inflows remained well below 2009 and 2010 levels, when long-term funds attracted EUR 214.8 billion and EUR 255.2 billion, respectively. But compared to 2011, when the eurozone crisis was raging more violently, sentiment in 2012 was bullish. That year, investors pulled EUR 58.6 billion out of long-term funds. Bearing in mind that the crisis is not resolved, Europe’s fund promoters have fared reasonably well.

The Changing Landscape of Mutual Funds in Europe

The eurozone crisis has, however, invoked a marked shift in Europe’s fund landscape. Fixed income vehicles witnessed an unprecedented boom in 2012. Investors poured a breath-taking EUR 176.5 billion into bond funds in 2012, the highest inflows on record (Morningstar’s European flows data dates back to 2007). In fact, bond funds captured 10 times the inflows in 2012 than they did from 2007 to 2011 combined. 

Within fixed income, higher yielding bond funds captured far more money than government bond funds, which are seen as neither risk free nor high yielding. In contrast to the US, where the love affair with bond funds dates back to 2007, the fixation is newer for Europe. Before 2012, flows in Europe were distributed fairly evenly between bond and equity funds. In fact, from 2007 to 2011, equity funds enjoyed greater net inflows than bond funds, posting a combined EUR 28.4 billion in inflows against EUR 18.6 billion seen by fixed income funds over that five-year period. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
ASI Global Absolute Ret Strat R Acc78.20 GBP-0.51Rating
Carmignac Patrimoine A EUR Acc723.01 EUR-0.33Rating
PIMCO GIS Ttl Ret Bd E USD Acc29.53 USD0.47Rating
Templeton Global Bond A(acc)USD28.43 USD0.51Rating

About Author

Ali Masarwah

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

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