The number of investors bailing out of bond funds has surged to levels not witnessed in years as concerns over emerging markets continue to escalate.
According to Morningstar, after fixed income funds suffered outflows of €17.6bn (£12.7bn) in August, European investors dumped an additional €16.3bn (£11.68) in September.
M&G, Pimco and Franklin Templeton continued to experience high outflows, while Aberdeen Asset Management was hit the hardest in relative outflows.
Morningstar says rising credit spreads and worries of a stark slowdown in China have conspired to drive the largest quarterly outflows for European fixed-income funds since the financial crisis, with more than €34bn fleeing portfolios.
Morningstar research analyst manager Matias Möttölä says: “Worst-hit during the quarter were emerging-markets bond funds of all types, with funds focused on renminbi bonds seeing the highest outflows in relation to their size.
“Developed-markets fixed income funds with exposure to corporate bonds also experienced sharp outflows as credit spreads rose globally.”
Franklin Templeton endured heavy redemptions, seeing €16.1bn of outflows year to date. Its Global Bond and Global Total Return funds shed €5.6bn and €3.9bn, respectively, in flows in the first nine months of the year. Both witnessed their market value drop in the third quarter by €2.4bn and €2.1bn, respectively.
While the flows endured by Franklin Templeton were the largest in total terms, the biggest loser in relative terms among the larger asset managers was Aberdeen Asset Management. The manager saw €10.7bn of outflows of its €55bn in total assets, meaning its organic growth rate reached -17.7 per cent for the year to end of September.
M&G saw €11bn of outflows year to date, while Pimco saw more muted outflows of £1.1bn so far this year.
The most notable large fund with significant inflows was the Standard Life Global Absolute Return Strategy, with its UK and Luxembourg-domiciled vehicles gathering a combined total inflow of €608m, according to Morningstar estimates.