A net €28 billion flowed out of bond funds in Europe in June as investors responded to signals that the United States Federal Reserve will taper bond purchases.
Bond yields have ticked up significantly since Fed chairman Ben Bernanke hinted at an end to the bank's quantitative easing programme.
Yet bonds remained the best-selling asset class this year, according to data from Lipper, with bond funds having attracted more than €80 billion in the first six months of 2013, even accounting for the outflows in June.
“Even though bond funds showed net outflows for the month as a sector, the detailed numbers for the different types of funds in this asset class varied a lot,” says Detlef Glow, head of research, Europe, Middle East and Africa, at Lipper.
Emerging market bond funds and high yield bond funds were hard hit, with net outflows from these fund categories of about €5 billion each in June.
But short-term European bond funds, flexible and speciality bond funds attracted new inflows during the months.
Some bond funds were able to post good returns in the second quarter despite the turmoil caused by Bernanke's statements.
Fund analytics firm Camradata says the best performing global bond fund in the quarter was the Scout Unconstrained Bond Strategy, by Scout Investments, which scored high on its various measures of consistency and efficient employment of risk.
“In the global fixed income universe Scout Investments were able to weather the change in market sentiment by finishing at the top of the rankings,” says a Camradata report. “Their ability to produce strong relative and risk adjusted returns as well as showing genuine skill in beating the benchmark allowed them to push themselves ahead of the competition.”
The best-performing emerging market hard currency debt fund was the Emerging Markets Fixed Income Composite fund from Logan Circle Partners, according to Camradata's rankings, while the best European broad bond fund in the quarter was the FF Euro Bond Fund from Fidelity Worldwide Investment.
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