European investors increasing exposure to risk, Morningstar fund data says

Fund flow data published by Morningstar suggests that European fund investors are ignoring the risk of eurozone implosion, and are increasing their exposure to risk, including equity funds.

The September period data is the first since February to record net positive flows to equity funds, some €1.91bn.

Morningstar said it indicated the end of a “period of disconnect between fund investor behaviour and equity market performance.”

The top ten equity categories ranked by September inflows were global emerging markets, global large cap value, eurozone large cap, Europe flex-cap, Europe ex-UK large cap, global equity currency hedged, Europe large cap blend, Asia-Pacific ex-Japan, Europe large cap value, and emerging Europe.

Just three of these equity categories have recorded net inflows on a year to date basis: global emerging markets, global large cap, and global equity currency hedged.

Besides equity funds, there were also net inflows for fixed income funds overall, although certain sub-sectors such as UK government bond funds saw net outflows. That said the area of fixed income funds continued to account for a far larger slice of overall net inflows to the industry – some €15.9bn in September, taking the total third quarter inflows to €53.24bn, which is the highest ever quarterly inflow to bond funds recorded by Morningstar since 2007.

The region’s interest rate policies are continuing to hurt money market funds, however. The sector saw another net €18.3bn withdrawn, taking the quarterly net withdrawal to more than €25bn.

Ali Masarwah, part of Morningstar’s European research team, said: “European fund investors have seemingly begun to embrace the idea that the euro may not implode after all. The comeback of equity funds in September suggests that investors are finally reacting to buoyant equity markets and the announced Outright Monetary Transaction programme of the European Central Bank. That said, the continuing bond fund glut in September and the sizable flows into high-yield bond funds over the past months indicate that markets are still distorted by the monetary policy of the ECB and the persistent eurozone crisis.”

The top 10 asset gatherers over the quarter, according to Morningstar were:

Provider QTD net inflows €m
 Pimco 10,397
 BlackRock 8,817
 AllianceBernstein 2,980
 Morgan Stanley 2,918
 Axa 2,901
 Generali Investments Europe 2,683
 M&G 2,146
 Carmignac 2,017
 Nordea 1,583
 BFT 1,501

 

 

 

 

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