Europe and rest of the world flock back to equity funds in Q4 2010

Europe and the rest of the world flocked back to equity funds in the fourth quarter of 2010, while appetite for bond funds fell, in a sign of strengthening investor confidence at the end of last year.

Investors worldwide drove the largest net cash inflows into equities in the fourth quarter of 2010 seen since the second quarter of 2009, latest data from the European Fund and Asset Management Association (EFAMA) showed.

In both Europe and the US, appetite for the asset class returned, measured against the previous quarter when investors shied away from equities.

Globally, equity fund inflows hiked to €68bn in Q4 of 2010 from net outflows of €16bn in Q3.

European investors’ hunger for equities increased further, to inflows of €39bn in the final quarter from net inflows of €4bn in the third quarter. In the second quarter of 2010, equity funds in Europe saw net outflows of €12bn, although that was the only time sales were negative since Q1 2009.

The desire of US investors to hold equities virtually reversed from what it was in the previous quarter, as net outflows of €24bn in the third quarter became net inflows of €29bn.

Another sign of risk appetite reemerging came from the sharp decline in sales of bond funds. Worldwide, bond funds lost €105bn in the last quarter of 2010 against the previous quarter, falling from €128bn to €23bn.

Investors in Europe withdrew €36bn from bond funds, with sales decreasing from €37bn in the third quarter to €1bn in the fourth.

In the US, €62bn was pulled out of bond funds, dropping from €82bn to €20bn.

While globally sales of balanced funds were sustained at €28bn from quarter to quarter, in Europe they fell. In Q3 2010 sales of balanced funds in Europe were €13bn, whereas in Q4 they sank to €5bn.

Balanced fund sales in the US jumped by €7bn however, from €3bn in Q3 to €10bn in Q4.



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