Investors hungry for yield, says Morningstar

Morningstar European fund flow data for February shows net positive inflows, with investors adding more than €15bn in new assets to long-term European-domiciled funds.

Fixed-income funds attracted the vast majority of investor cash, with some €12.5bn in inflows, the asset class’s highest inflow figure since August 2010. Meanwhile, equity funds saw a modest outflow of investor capital. Money market funds lost €13bn.

The Morningstar research report also found that funds focused on corporate debt dominated bond fund inflows, with funds in the Morningstar Euro Corporate Bond category seeing the greatest inflows, followed by several high-yield categories.

Other findings of the report include:

– Pimco, M&G, and AllianceBernstein were all big beneficiaries of inflows to bond funds. 

– Fixed-term bond funds sold in Italy saw large inflows.

– Allocation and convertible funds were also popular. Convertible bond funds enjoyed their first month of inflows since April 2011; M&G Optimal Income led all allocation funds with €501m in new assets.

– Equity funds saw net redemptions, returning to a longer-term trend of outflows with some €189m redeemed in February; funds investing in Europe, the UK and the US were particularly unpopular.

– Money market funds also saw notable outflows in February, giving up some €13bn during the month.

Dan Lefkovitz from Morningstar’s European research team, said: “After sending money into funds of all types in January, European investors were more selective in February. Whilst equity funds saw outflows, fixed-income funds saw their strongest inflows since August 2010, led by corporate debt offerings.

“Investors are clearly hungry for yield and consider corporate balance sheets to be healthier than those of Western governments.”

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