Bonds Dominate EU Fund Flows in April

Morningstar research shows that fixed-income funds pulled in €27.2 billion in April, but equity funds continued to suffer withdrawals from investors

Valerio Baselli 28 May, 2019 | 9:13AM Ali Masarwah
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Bond funds were firmly in favour with European investors in April, the latest Morningstar data shows, with fixed-income funds attracting €27.2 billion. It is the third-best month for fixed-income funds since July 2017. Actively managed funds, meanwhile, continued to suffer at the hands of their passive rivals, including index funds and ETFs. But when it comes to bonds, investors still prefer an active fund. 

Equity funds remained in the doldrums in April, despite a decent performance for stocks in the month. Outflows from equity funds hit a hefty €11.2 billion, but this is still considerably less than the €18.1 billion of net redemptions suffered by the sector in March. Mixed asset funds returned to favour after a long stretch of net redemptions: April netted €2.2 billion, the first positive month for the category since September 2018.

Index funds – including both open-ended tracker funds and ETFs – raked in €9.5 billion in April, accounting for 43% of all net inflows sent to funds domiciled in Europe. Excluding money market funds, inflows to index funds accounted for an incredible 81% of all European fund inflows. As at April 30, the market share of index funds stood at 17.7% of Europe’s long-term fund market, compared with 16% just a year ago.

The current predicament of actively managed equity funds is the clearest sign of the crisis of confidence that active asset managers are experiencing. Passive equity funds raked in €2.9 billion in net new money in April, while their actively managed equivalents shed €14.2 billion. In the previous 12 months, equity index funds enjoyed inflows of €25.4 billion, while actively managed equity funds suffered outflows of €68.5 billion. This divergence is reflected by the rising share of index equity funds in Europe. At April 30, equity index funds account for 28.2% of all equity funds’ assets in Europe, up from 26.4% one year earlier.

Conversely, actively managed bond funds garnered inflows of €20 billion – more than in any month since January 2018. In absolute turns passive bond funds saw substantially lower inflows – €7.2 billion – but the growth rate relative to their size was double that of actively managed bond funds. In the past 12 months, passive bond funds enjoyed an organic growth rate of 17.7% versus -1.2% for actively managed funds.

Categories - Leaders

Global flexible bond. eg. PIMCO GIS Income

Emerging markets bond fund

Euro corporate bond funds

Categories - Laggards

Eurozone large-cap equity funds

Multi-strategy funds. eg. SLI Global Absolute Return

Equity funds exposed to Hong Kong

Fund Providers - Leaders

PIMCO

Royal London

iShares

Amundi

Fund Providers - Laggards

Fundsmith

Invesco - outflows from Europe and UK large-cap equity products

Lyxor S&P 500 ETF

UBS eurozone large-cap equity index funds

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About Author

Valerio Baselli

Valerio Baselli  is an Editor at Morningstar Italy.