Risk-on investors “pick up where they left off”, flows show

Fund flowsA Robeco government bond fund lost almost €1 billion in outflows as investors positioned themselves around volatility in January – a month that saw record inflows for the European industry.

European government bonds experienced the highest level of outflows at €1.4 billion, with the Robeco Euro Government Bond Fund suffering the most, Morningstar found.

Overall, equity funds commanded the lion’s share of January inflows, amassing €42.8 billion - though broad fixed income was the second most popular asset class with €22.7 billion, driven partly by emerging markets.

Risk-hungry investors in Europe were “picking up from where they left off” in 2017, said Ali Masarwah, regional editorial research director at Morningstar.

Emerging markets were popular with both equity and bond investors in January, Morningstar said. The category made up three of the five top-selling fund categories and emerging market equity funds offered by JP Morgan and Schroders witnessed the strongest demand – raising €829 million and €584 million, respectively.

The European funds industry had its strongest January on record with over €120 billion in net flows and European assets under management moved to a further record of €8.57 trillion.

Investors also favoured active funds over passive fund as they positioned themselves defensively around volatility, Morningstar found. Active equity funds saw inflows of €26.4 billion compared to €16.4 billion into passive equity funds, while investors poured €19.9 billion into actively-managed fixed income funds and €2.8 billion into passive bond funds.

Masarwah said preliminary data for February indicated that inflows to index funds had receded, but were “by no means” negative, and that demand for actively managed funds witnessed a “sharp drop”.

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