October flows ease the pain for fund managers

OutflowMoney continued to flow out of European funds in October, but at a reduced rate, according to data firm Lipper. And improvements in equity and bond indices meant that the industry's assets rose 2.3% to €5.2 trillion. Total assets are now about €300 billion less than at the end of 2010.

The results are hardly cause for celebration, yet they are encouraging for fund managers trying to recover from the trauma of the summer selloff.

“It is a sign of the times that outflows from the European funds industry of €19.7 billion might be seen as easing the pressure on fund managers,” said Lipper.

Bond funds showed signs of recovery. In September, investors in these products withdrew €17.2 billion in redemptions, but this came down to €1.2 billion in October – not a positive result, but a significant improvement.

Redemptions of equity funds decreased by roughly half to €10.6 billion in October. And high-yield bond funds, which have struggled in past months, staged an impressive comeback by attracting €3 billion of inflows.

There are still some worrying factors. Net withdrawals in traditionally resilient markets such as the UK and Switzerland are a sign of continuing unease, prompting Lipper to comment that “it is not hard to be a pessimist”. And, as in previous months, “safe haven” investments such as US bonds and gold accounted for much of the inflows.

But Lipper emphasised that “fund buyers have not given up the search for the industry’s diamonds and pearls”.

©2011 funds europe