Appetite for bond and equity funds surges on anticipation of rate cuts

In February 2024, European long-term funds experienced an influx of €19.4 billion, building upon January’s acquisition of €24.9 billion, according to Morningstar’s European Asset Flows data and commentary for February 2024.

Investor interest in equities and fixed-income strategies remained strong in February 2024, buoyed by optimism over potential interest-rate cuts. The European equity markets surged by 1.75% during the month, as per the Morningstar Europe NR EUR Index.

Equity funds marked a second consecutive month of inflows, with €5.1 billion flowing in. Passive equity funds dominated the scene, attracting a substantial €19.1 billion, while actively managed products faced net outflows of €14 billion.

Investors foresee bonds and equities becoming more negatively correlated

Fixed-income strategies remained in favor, attracting €30.9 billion in February. Within this segment, active managers drew in €25.9 billion, while index funds gathered over €5 billion.

Despite major central banks maintaining policy rates, market attention turned to anticipation of rate cuts, particularly after mid-March’s release of stronger-than-expected US inflation data, dashing hopes for a Federal Reserve interest-rate cut before June.

Allocation and alternative strategies continued to witness outflows, with €9.93 billion and €1.98 billion, respectively. Commodities funds also faced negative sentiment, experiencing nearly €1.23 billion in net outflows.

Furthermore, money market funds registered outflows of €9.4 billion, marking the first negative month since June 2023.
In the fund landscape, long-term index funds stood out, posting inflows of €22.9 billion, while actively managed funds saw net outflows of €12.9 billion.

Assets in long-term funds domiciled in Europe increased to EUR 13.088 trillion by month’s end from €12.899 trillion at the end of January.

WATCH NOW: Corporate Transition Plans: Challenges and Opportunities for Investors

A noteworthy trend emerged within the scope of the Sustainable Finance Disclosure Regulation: funds categorised under Article 8 experienced net inflows for the second consecutive month, whereas Article 9 funds (“dark green” strategies) witnessed outflows of €2.1 billion in February.

Global large-cap blend equity led as the best-selling Morningstar Category, trailed by fixed-term bond funds. Conversely, other allocation and sector-equity ecology thematic funds experienced the highest net outflows at the category level, followed by EUR flexible allocation global.

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

CLOUD DATA PLATFORMS

Luxembourg is one of the world’s premiere centres for cross-border distribution of investment funds. Read our special regional coverage, coinciding with the annual ALFI European Asset Management Conference.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST