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European investors sell equities prefer bonds

As uncertainty in Europe increased, with new parliamentary elections in Greece looming, and the plunge in commodity prices sent some emerging markets down, European equities and global emerging market equities suffered the largest net outflows of €2.7bn and €419m, though the outflows were smaller than in October.

US equities registered minor net outflows of €145m after two straight months of net inflows. The only major equity categories to record net inflows therefore were Japanese equities (+ €354m) and Asia ex-Japan equities (+ €219m).

Flight to safety?

On the bond front, investment grade corporate and government bonds, the lowest-yielding but supposedly safest fixed income investments, as well as emerging market bonds all registered more than €1bn in net inflows. The only outlier were high yield bonds, which registered a fifth consecutive month of net outflows, though they have subsided somewhat: from more than €5bn in September to €831m in November.


An absolute exception

The sudden outflow spike in long-short debt witnessed in October seems to have been a one-off event, though the asset class still recorded net outflows of €128m. Overall, absolute return inflows turned positive again, also helped by the record net inflows of €1.7bn into multi-strategy funds. As European investors have been looking to diversify their portfolios and mitigate risks, they have not only stepped up their investments in bond funds, but have been pouring into multi-strategy hedge funds as well.

Up until November, total net inflows amounted to €12.8bn. This makes it the second most popular Morningstar-category in terms of net inflows. Only euro-denominated developed market corporate bonds registered higher net inflows of €16.7bn.

Part of the Mark Allen Group.