Fitch survey finds inflows to European bond funds expected to slow

Fitch Ratings’ latest quarterly survey of European fixed income investors found that most expect a slowdown in the amount of investments in European bond funds.

The survey, which closed on 29 July, represents views from managers responsible for about $4.3trn of fixed income assets.

Two-thirds (67%) of those surveyed expected lower inflows to European bond funds. A quarter (26%) expected no significant reallocation in the second half of 2011. Some 68% expected a slowdown in overall inflows to fixed income through 2011.

Aymeric Poizot, senior director in Fitch’s Fund and Asset Manager Rating group said the asset class was challenging in the current environment. Yields are at risk, and there are high levels of correlation between equity, credit spreads and government bonds.

Other risks highlighted by Poizot include inflation and unconventional monetary policies.

Patterns noted in the first half of the year were that funds focused on European debt experienced outflows, but that those focused on high yield, emerging markets or global bonds experienced inflows.

However, European high yield funds have been hit by risk aversion and equity-like behaviour, leading to a reported outflow of €1.5bn in June alone, according to Lipper figures cited.

Swedish patterns

Latest Swedish monthly fund flow figures reported by the Swedish Fund Management Association suggest investors there continue to make net investments into bond funds.

Covering July, its figures suggest that local investors made few changes overall – they redeemed SEK0.3bn net across all asset classes – but that money did flow from equity to bond funds.

SEK2.1bn was redeemed on a net basis from equity funds and SEK3.3bn was invested in bond funds. Overall assets under management in bond funds have risen steadily through 2011. The Association’s figures show that they stood at about SEK182bn in January, rising to SEK195bn by July.

Total assets under management by the members’ funds was SEK1.9trn as of 31 July.

While investor activity was low in July – the time when Swedes typically take summer holidays – the Association notes that its statistics do not cover the first days of August and the dramatic developments on world stockmarkets.

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Jonathan Boyd
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