However, if the trend in the graph below is anything to go by, that could well change over the course of 2015, as there appears to have been a slight shift down in fixed income flows in the last month of the year.
While equity funds retained the top spot with $439bn in inflows during the year, fixed income funds gathered $371bn in net inflows. However, if one looks at it from a growth point of view, real change came in alternative and unclassified funds.
Equity and fixed income funds grew at 3.6% and 6.4% respectively, while alternative funds on the other hand saw organic growth of 15.6% over the year, albeit off a smaller base, bringing in $82bn. Unclassified funds saw flows of $6bn, at a growth rate of 13.5%.
The only sector to see net outflows over the year were commodities funds which saw outflows of $5bn.
The other big winner during the year were allocation funds, which grew 9.7%, with flows of $268bn.
“As the search for yield becomes ever more challenging in the global fixed-income space, it appears that many investors still value the lower volatility of bonds more than the higher return potential of stocks,”Morningstar said, adding: “Allocation funds continued to attract steady inflows and had a robust organic growth rate of 9.7% in 2014. Allocation funds tend not to have the volatile flows of the equity and fixedincome categories because investors are less concerned about market fluctuations when they are choosing a fund with built-in diversification across asset classes.”
Within the largest equity market, the US, the main change was a shift from large cap growth funds into large blended funds.
“This seems to indicate a shift within the equity universe, from a higher-risk, higher-return approach with growth stocks to a more middle-of-the-road strategy with blend stocks. Moreover, it is also illustrative of the accelerating shift from actively managed to passively managed funds that has been happening predominantly in the U.S. equity realm.”
