Investors Adopt Short-term View as Risk Escalates

Close to EUR 9 billion was pulled from Europe's long-term funds last month as investors sought out safer destinations

Dan Lefkovitz 28 June, 2012 | 5:03PM

With the eurozone crisis roiling markets, investors shifted toward safer assets in May. Long-term funds in Morningstar’s European database saw net outflows of nearly EUR 9 billion during the month.

Equity funds were the big losers, shedding EUR 12.5 billion in investor assets, according to Morningstar data. Alternatives-focused funds saw EUR 1 billion in outflows, while commodities and convertibles were also in net redemptions.

Much of this money was likely reallocated to money market funds, with short-term funds attracting EUR 15 billion of inflows in May. USD money market – short term was the most popular of Morningstar’s money market categories in May with EUR 11 billion in inflows. But funds in the euro money market category took in EUR 7 billion. And funds in the GBP short-term money market category saw outflows of EUR 4 billion. This trend stands in contrast to the second half of 2011, when investors shifted into USD- and GBP-denominated liquid funds, fleeing the perceived risk of the European single currency.

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Dan Lefkovitz

Dan Lefkovitz  is strategist for Morningstar’s Indexes group

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