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Investor exodus from defensive multi-asset funds

According to Morningstar fund flows data, so-called cautious allocation funds saw net outflows of €3.6bn in the first two months of the year. This marks a sharp change in fortunes for the fund category: in the 18 months to June 2015, defensive multi-asset funds saw some €40.7bn in net inflows.

Apparently, investors have realised the ultra-low yields have rendered the long-term return prospects for these funds so poor that they need to increase the risk they take. Over the past three years, the fund category has only generated a measly total return of 1.66%, comparable to interest income from a savings account. Moreover, since April 2015, so-called cautious allocation funds have lost 7.55%.

Though investors in medium-risk multi-asset funds also lost a lot of money in the past year, total returns since 2013 have been about three times as high. Consequently, investors have been shifting their assets to these higher risk alternatives: in February alone, moderate allocation funds saw net inflows of €2bn.

Click here to see an overview of all latest fund flows. 

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