Bond funds attract strong demand as investors search for yield, EFAMA says

Net inflows into UCITS funds were €6bn during July, compared to outflows of €33bn in June, according to the latest data released by The European Fund and Asset Management Association (EFAMA).

This reflected an increase in net sales of long-term UCITS, from net redemptions of €9bn in June to net inflows of €25bn.

Net sales of bond funds jumped to €23bn during July, up from €5bn in June. Equity funds recorded reduced net outflows of €2bn, compared to €9bn in June.

Money market funds recorded net outflows for the second month in a row, also caused by lowering of the ECB’s deposit rate to zero.

Total net sales of non-UCITS recorded a significant increase leap in July, to €42bn from €11bnbillion in June. This increase was attributable to net inflows into special funds which registered €38bn in July, EFAMA said.

At the end of the month, total net assets of UCITS were €6,183bn, while non-UCITS net assets stood at €2,447bn.

EFAMA’s statistics for the second quarter also showed strong demand for bond funds as investors searched for yield in a low interest rate environment.

UCITS recorded net inflows of €7bn, down from net inflows of €91bn billion in the first quarter of the year. This drop was mainly attributable to a reduction in net inflows into long-term funds.

Overall in the first half of 2012, UCITS recorded net inflows of €98bn, a sharp turnaround compared to the second half of 2011 when UCITS suffered net outflows totaling €133bn.

According to Bernard Delbecque, director of economics and research, the developments in the UCITS market confirmed the role played by investor expectations about future economic growth in determining the demand level for long-term UCITS.

“After a dismal second half of 2011 dominated by the worsening of the euro area sovereign debt crisis, net sales of UCITS rebounded in the first quarter of 2012 following the launch of the ECB’s longer-term liquidity operations, and they remained positive in the second quarter despite renewed concerns about the economic outlook,” he said.

Looking forward, Delbecque expects investors to add new money to long-term UCITS during the third quarter following the rebound recorded in July and the agreement reached by the ECB on a bond buying plan to secure the future of the euro.

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