European Investors Abandon Bond Funds

Investors in Europe left fixed income funds in their swaths last month - with particular outflows from emerging market bonds, in favour of European equities

Matias Möttölä, CFA 28 October, 2015 | 2:00PM
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European investors continued to draw assets hastily out of fixed-income funds in September at a pace not seen in years. After suffering outflows of €17.6 billion in August, the asset class lost another €16.3 billion in September. Rising credit spreads hurt corporate bonds and worries of a stark slowdown in China weakened emerging-markets bonds, resulting in the largest quarterly outflows for European fixed-income funds since the financial crisis of 2008.

Worst-hit during the quarter were emerging-markets bond funds of all types, with funds focused on renminbi bonds seeing the highest outflows in relation to their size. Developed-markets fixed-income funds with exposure to corporate bonds also experienced sharp outflows as credit spreads rose globally.

In September, outflows were mostly concentrated in fixed-income categories, whereas allocation and alternative funds continued to draw in new money, albeit at a slower pace than earlier in the year. Even equity funds saw inflows after surrendering more than €20 billion in August’s market turbulence. Altogether, European long-term funds saw outflows of €6.2 billion in September. The rise of indexing continued in September, though at a slightly slower pace than in August.

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About Author

Matias Möttölä, CFA

Matias Möttölä, CFA  is a fund analyst and editor of Morningstar.fi.

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