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Investors dump longshort debt

Investors withdrew €2.76bn from their long/short debt holdings. This is a sharp retreat from a strong buying trend observed this year. Net monthly flows into the asset class had exceeded €1bn in 6 out of 9 months this year until October, totalling €10.49bn.

Long/short fund flows

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Investors apparently not deem it necessary for the moment to seek protection against falling bond prices, as they count on the ECB to provide a backstop in the form of a new bond buying programme. The use of long/short debt funds varies widely across Europe. According to EIE data gathered this year, the share of fund selectors using these strategies varies from more than 90% in Italy to less than half in The Netherlands, Norway and Denmark. With the exception of Finland, long/short equity tends to be more popular than its bond equivalent.

Long/short hardship compounded

Long-short equity funds, especially those invested in European equities, have also had a hard time of late in attracting fresh capital as market volatility stays low. Even during October’s downturn it was difficult for long-short managers to make money as stocks kept moving up and down in tandem. Investors seem to have now turned to multistrategy funds, possibly a reflection of the increased popularity of multi-asset funds with long-only investors. The category registered total net inflows of close to €3bn in September and October combined. 

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