European investors have been dismissing US equities as too expensive for a couple of years. But as the S&P 500 continues to outperform other equity markets, appetite for the asset class is again on the rise.
There are now for the first time more multi-asset funds than bond funds for sale in Europe, according to statistics released by Lipper today.
With government bond yields in developed markets at record lows, asset managers are more pessimistic than ever about return prospects for the asset class.
Emerging market bonds have undergone a remarkably quick transformation from one of the least loved asset classes to perhaps the most popular. This has been driven by the relative attractiveness of emerging market debt compared to developed market fixed income, but to what extent have the fundamentals of the asset class actually improved?
The popularity of bond funds was reinforced by the Brexit vote. While all fixed income asset classes saw net inflows, investors especially flocked to emerging market debt in July, according to fund flows data from Morningstar.
The average net expense ratios of European-domiciled funds have come down across the board since 2013, according to a study by Morningstar.
European equity funds experienced their largest ever monthly net outflows in July, beating the previous record set in January 2008.
In August 2015, emerging market equities were in the midst of the most serious market correction since 2008. A year on, investors are more bullish than ever about the asset class. Is this radical change of mood justified?
In the first half of 2016, investors in Europe have poured in $5.7bn (€5.1bn) into smart beta funds as market capitalisation index trackers saw outflows over the period, according to Morningstar data analysed by ETF provider WisdomTree Europe. Brexit could be one of the reasons for the switch.
Investors have again started looking at increasing their exposure to commodities this year. However, the asset class has delivered mixed results so far.
The ultra-loose monetary policy pursued by central banks since the financial crisis has implied an unprecedented fall in discount rates, which has led to a massive front-loading of returns: not only for bonds, but also for equities. Does this mean you should take your profit now and sell?
Not only fund flows are capricious when it comes to high-yield bonds. Investor sentiment towards the asset class also swings continuously, particularly on a country-by country- basis.
