Blockbuster Month for Bond Funds

European fund investors continued to pile into bond funds and leave equity funds behind

Alanna Petroff 30 August, 2012 | 3:59PM Ali Masarwah
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It’s been a great summer for bond funds and bond fund managers, with July marking the best month for overall bond fund inflows since at least 2007, according to Morningstar’s latest fund flows research. Yield-seeking investors were specifically piling into high-yield, corporate, and emerging-markets bond funds.

The schism between bond and equity funds remained evident in July, with bond funds taking in €19.48 billion, while equity funds shed a net €5.3 billion.

“One of the most surprising features of the eurozone crisis has been the steadily rising risk appetite of bond fund investors,” said Ali Masarwah, an analyst from Morningstar’s European research team.

One of the most surprising features of the eurozone crisis has been the steadily rising risk appetite of bond fund investors.

“The continuing haemorrhage of equity funds even in times of buoyant markets seems to indicate that investors have broad concerns about the ability of global growth to support equity valuations. On the other hand, the substantial inflows into high yield bond funds indicate that bond investors desperately seeking yield may not have hedged their bets, considering that the outcome of the eurozone crisis is far from clear,” said Masarwah.

Other key findings from the report include:

  • The 10 Morningstar bond categories enjoying the highest inflows in July mainly consisted of risky assets, with the USD High-Yield Bond category topping the list with inflows of €2.14 billion.
  • PIMCO topped the list of best-selling fund providers across Europe, with July inflows of €3.87 billion.
  • Short-term and government bond funds saw substantial outflows, with the Morningstar categories EUR Ultra Short-Term, EUR Diversified Bond Short-Term, GBP Government Bond, and EUR Government Bonds topping the outflows table.
  • Money market funds saw net outflows of €10.23 billion in July. This marks a reverse in trend, since there were sizeable inflows to money market funds during the first half of 2012.


In sum, long-term OEICs and unit trusts sold in Europe attracted net inflows of €16.15 billion in July. This follows on the heels of a net outflow of €1.2 billion that was reported in June. The year-to-date total to net inflows into these funds has now reached €70.5 billion.

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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Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.