European bond funds absorbed a 'breath-taking' €176.5 billion in net inflows in 2012, according to Morningstar, the highest annual total since the data provider began tracking fund flow data in 2007.
The sum is ten times the combined sum of bond fund inflows in the years 2007 to 2011.
Of the top ten asset managers by estimated European fund flows, eight are known for their focus on bonds. Fixed income specialist Pimco came top with an estimated €32 billion in net inflows in 2012, followed by AllianceBernstein with €13 billion and AXA with €9 billion. Money market funds were not included in these figures.
Investors sought bonds that offered good returns, such as high-yield bonds, though they shunned European government and short-term bonds. The most popular of Morningstar's categories consists mostly of high yield, flexible and target maturity funds that are hedged, says the firm. Emerging market bond funds also attracted good inflows.
BNP Paribas had the year's worst estimated outflow, €7.5 billion, according to Morningstar's figures, followed by Santander with €3.6 billion and Anima with €2.4 billion. Again, money market funds were excluded. Morningstar suggests these asset managers suffered because of their exposure to European government bonds.
Equity funds attracted good inflows in the final quarter but still ended 2012 with a net outflow of €6.8 billion.
The eurozone crises “invoked a marked shift in Europe’s fund landscape”, says Ali Masarwah of Morningstar's European Research Team. “Fixed income vehicles witnessed an unprecedented boom in 2012.”
He adds: “Within fixed income, higher yielding bond funds captured far more money than government bond funds, which are seen as neither risk free nor high yielding.”
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