Morningstar data spots February funds drawdowns

Amid ongoing market volatility, European investors continued to withdraw assets from long-term open-ended investment funds through February, Morningstar data shows.

Equity fund outflows totalled some €7.3bn over the month, despite equity markets recovering much of their losses by the end of February.

Outflows hit Japanese large cap equity and US large cap growth equity funds, while investors also expressed concern about fixed income, with yields on top rated European government bonds being pushed lower. Spreads on high yield bonds widened because of rising macroeconomic fears, Morningstar suggested. Total outflows from long-term fixed income funds hit €8.6bn, taking total net flows out of European long-term funds to €16.8bn over the month.

Other key findings in the data include:

  • Open-end index funds saw inflows of €4.4bn during the month, and index-tracking exchange-traded funds (which are not included in the figures presented in this report) added inflows of another €2.4bn, lifting the total inflows to index funds to €6.8bn, while non-index funds surrendered €21.3b to outflows in February.
  • At the category level, investors continued to favour funds in the EUR Moderate Allocation – Global category, which had inflows of €2.3bn, and Alternative – Market Neutral category, which had inflows of €1.2bn.
  • Fixed-income categories saw the largest outflows, caught in a continued squeeze of falling yields and rising risk spreads. All 15 funds in the alternative long/short debt category lost more than 10% of their assets to outflows during the month.
  • More than half of European providers lost assets from their long-term funds in February, but the top asset gatherers were Nordea, which had inflows of €1.4bn, and Lyxor, which had inflows of €890m, lifted by inflows into its suite of French open-end index funds.
  • Franklin Templeton has now lost at least €1bn to outflows for 12 months in a row, with much of its outflows stemming from its two fixed-income funds, Templeton Global Bond, which has a Morningstar Analyst Rating of Silver, and Templeton Global Total Return, which has a Bronze Analyst Rating.

 Matias Möttölä, senior manager research analyst for Morningstar, said: “As in previous volatile months, there was a notable divergence between flows to index and non-index funds.”

“While index funds continued to see inflows in February despite the market turbulence, non-index funds suffered strong outflows. Looking back over the last 12 months, index funds’ total monthly net flows seemed to bear very little relation to market developments, whereas non-index flows mirrored short-term market movements. This may indicate that index funds are seeing a constant flow of assets from investors who do not see reason to withdraw assets from them based on short-term market moves.”


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