Sales of long-term funds in Europe picked up markedly in January as the so-called reflation trade gained traction in capital markets worldwide. Hopes on stronger economic growth drove up net flows into open-end funds to €33.2bn, according to Morningstar’s estimates, the highest level seen in a one-month period since July 2015.
A deeper look at the inflows of €3.36bn into open-end equity funds (excluding ETFs) reveals that actively managed funds took in the lion’s share of those inflows, enjoying net new money of €2.75bn during the month. This is in stark contrast to the flow picture of equity funds in 2016 when they suffered outflows of €86bn, and the last month with higher inflows was October 2015.
Further findings from Morningstar’s fund flows report for January include:
- Bond funds were the strongest sector, enjoying inflows of €16.86bn, while allocation funds raked in €7.29bn, their highest one-month tally since July 2015, and alternative funds pulled in a robust €3.14bn.
- The safety of money market funds continued to attract investors, with the funds seeing inflows of €30.54bn, making January 2017 the third-strongest month on record since Morningstar started collecting asset flow data in 2007.
- The strongest trend in category-level outflows was a move away from European assets, with Euro-denominated corporate and diversified bonds seeing over €2bn of outflows.
- Amundi topped the ranks of asset gatherers with €2.4bn of inflows – the highest for the French asset manager since May 2015.
- The fund providers that saw the largest outflows have their business concentrated in specific countries, with Delta Lloyd of the Netherlands posting over €1bn of outflows, and Danish Laegernes Invest and Italian Aletti Gestielle close behind.
- Among the largest funds in Europe, the highest inflows, of €1.2bn, went to the Pimco GIS Income Fund while Standard Life Investment’s Global Absolute Return Strategy saw outflows of €677m.
Ali Masarwah, EMEA editorial director for Morningstar, said: “Flows for January revealed several strong themes. Firstly, inflows into risky assets were strong. Global high-yield bond funds were the strongest category and emerging-markets bond funds rebounded from the post-US election scare, with flows especially strong into hard-currency bond funds.
“The other theme was strong inflows into allocation and alternative multi-strategy funds. This trend has been going on for some years due to investors and advisers increasingly delegating asset-allocation decisions to asset managers. With an organic growth rate of 21.6% over the previous 12 months, alternative multi-strategy funds have outpaced all the other top-selling categories by a wide margin.
“The story remains a very concentrated one, however, and only a handful of funds have profited from investors’ drive to this category: Invesco Perpetual Global Targeted Return, Goldman Sachs Strategic Absolute Returns and Deutsche Concept Kaldemorgen pulled in more than €1bn in net new assets combined in January.”