European long-term mutual funds rebounded from a slight slowdown in net flows in May to post sales of €36bn in June, their second highest tally so far this year. This stood in stark contrast to the sharp about-turn seen a year previously, when the taper tantrum drove investors to pull €31bn. In both cases, the fixed income category was at the heart of the story, just as it was in the preceding months.
Bond sales demonstrate stamina
June’s bond fund inflows of almost €19bn made for the highest of the year to date, though they were given a helping hand by the month’s bestseller from Scottish Widows, likely a technical move in the wake of its takeover by Aberdeen. Fixed income fund sales have been the European industry’s main driver of business in most months of the year so far, though underlying tastes have shifted — while high-yield sectors were favoured in the early months, investors’ appetite for emerging market debt began a comeback in March that has placed the sector at the top table since April. Such funds were not the sole generators of success, flexible and corporate bond funds also being snapped up. Even the generic global bond sector returned to positive inflows in June, assisted by a stemming of redemptions from Franklin Templeton’s mega- funds in this space.
Mixed assets maintain herd appeal
The steady inflows into mixed asset funds (further €12.5bn in June) have become almost as regular as the tides, their appeal to the mass market continuing unabated. While the concept of the ‘herd’ can seem derogatory, such investments are, in this post-downturn environment, arguably rather smart. To some, they offer a more nuanced, solutions-based approach that provides a good fit for differing investor risk profiles, and to others, a one-stop- shop product that has the flexibility to adapt to market conditions and cushion downside.
Equity demand huffing and puffing
Pure equity funds have failed to maintain the sales pace set at the start of 2014 and, without a record-breaking new launch in the UK, would have ended June firmly in the red. €36bn of first-half inflows is nonetheless a €10bn improvement on the same period last year. Some investors will have been profit-taking, with a number of bourses posting pleasing growth, but the ongoing popularity of mixed asset funds acts as a reminder that others prefer their equity exposure watered down.
Source: Fund Radar First Sight Issue 2014/06