European equity funds registered a fourth straight month of net outflows in October, which totalled €5.6bn, according to Morningstar. These were the largest net redemptions since our records began in 2011. The 6-month strike of positive inflows for emerging market equities came to an abrupt end, with European investors withdrawing €1.94bn from the asset class.
Much of the redemptions from European and EM equities seem to have gone straight into US equity funds, which recorded a striking €2.16bn in net inflows in October. The last time US equity net inflows exceeded the €1bn mark was in April this year.
The underbelly rules
The shift in equity fund flows remarkably reflects that in fund manager sentiment as measured by Skandia over the same month. Asset management companies have markedly changed their 12-month return outlook in favour of US equities. In contrast, they strongly downgraded their expectations for European and especially EM equities.
However, European fund selectors do not really buy this panic investing. They continue to see more perspective in European and EM equities than in their US equivalents. And considering October’s market slump did not develop itself into a full-fledged crisis in November, buying patterns in November might have changed dramatically once again. Stay tuned!