Posted inEquitiesEurope

European equity outflows continue

Net outflows from mutual funds invested in European equities almost doubled to €3.4bn. This high figuretruealt='' might be surprising to some, considering that the last time outflows around this level were recorded George Papandreou, Greece’s prime minister at the time, had just announced a referendum on Greece leaving the Eurozone. But, though European equity 12-month forward looking Pan-European sentiment remains positive, delegates at EIE events in Denmark and Sweden (see chart) held during the past few weeks indicated in great numbers they have recently reduced their allocation to European equities.

alt=''Fund manager sentiment towards European equities contrasts starkly with investor behaviour over the summer. While investors pulled out more than €5bn in July and August, according to EIE’s fund manager sentiment survey for September the majority of asset management companies still expects returns of more than 5% for European equities over the following 12 months. 

Asia going strong

US equities suffered outflows too, though these were considerably smaller at €165mln. The only good news in terms of net inflows on the equity side came from Asia ex-Japan equities. Inflows into this category were robust at €2.2bn, though also these declined slightly from the previous month. Net flows into global emerging market funds halved to a little more than €1bn.

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Risky bonds out of favour

On the fixed income side things look gloomy for high yield bonds. Investors keep dumping the asset class, with net outflows over the past two months totalling more than €11bn. The momentum of the emerging market bond revival seems to have passed for now as well. Inflows were particularly robust in spring, but have plunged over summer to a mere €400mln in August.

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Flows into absolute return products have also come down steadily this year, from almost €6bn in February to €1.8bn in August. The only two asset classes which, apart from emerging market equities, have held up pretty well during the past months actually are the two dark horses of the investor community: developed market government and corporate bonds. Especially government bonds have made a revival with net inflows coming up from €-0.5bn in June to €1.9bn in August.     

Part of the Bonhill Group.