Morningstar asset flow data showed investors in Europe added €22bn to fixed income funds during October. This takes the year-to-date inflows for the asset class to €136.8bn.
Risky bond funds were the most sought after last month, with the data showing high-yield, corporate, and emerging-markets bond funds as being the most popular. FUnds with flexible, go-anywhere vehicles investing across countries, credit quality, maturities and issuers were also in demand.
At the same time, “sizable” outflows were seen from euro and sterling denominated government bond products.
Ali Masarwah of Morningstar’s European research team said: “The motivation for the continuing bond-fund craze is open to interpretation. Superficially, European investors seem to be risk-happy and even careless with tightening credit spreads even as they are cautious on equities.
“Desperation might also be an important driver. Institutional investors face the prospect of long-term liability gaps, which arguably cannot be bridged by low-yielding safe government bonds.”
European fixed income investor tended to stick with well-established names and concentrated on flagship funds from Pimco, AllianceBernstein, M&G, Axa and Templeton.
Morningstar also showed that equity funds in European witnessed inflows of €1.8bn in October, the second month running of positive flows. Equity funds have seen outflows of €17.6bn over the year to date.
Global emerging market equities were the most popular with close to €2bn added over the month, followed by global large-cap blend and global large-cap value funds.
Figures published by the IMA yesterday showed equity funds outsold bond portfolios for the second consecutive month in the UK during October. Equity funds saw net retail sales of £550m, compared with the £336m that went to bond funds.
