Investors rush to fixed income funds after ECB’s QE expansion

EU-Europe-Flags-Euro-700x450.jpgInvestors rushed into fixed income funds after the European Central Bank announced it would buy corporate bonds as part of its QE programme.

Data from research house Morningstar showed that European investors returned to fixed income funds in March, following nine months of near-continuous outflows. Some fixed income sectors saw their largest inflows in a year.

Flows data for March showed that the Euro corporate bond sector saw €3bn of inflows for the month, while €11.6bn was invested in all fixed income funds for the month.

The flows follows the announcement from ECB president Mario Draghi’s of the decision to include corporate bonds in the QE programme, starting in June.

Following the move, Euro investment grade bond issuance had its strongest week on record at €30.6bn in March, as issuers rushed to market.

Matias Möttölä, senior manager research analyst for Morningstar, says: “European investors found their appetite for fixed-income funds in March after nine months of nearly continuous outflows.

“The [ECB] announcement drew European investors to funds in the EUR corporate bond and EUR high-yield bond categories. Both received their largest net inflows in any month since March 2015, when the ECB started buying sovereign and quasi-sovereign bonds.”

Schroders was the biggest beneficiary of the shift, with its ISF Euro Corporate Bond fund seeing the largest inflows at €517m. This was followed by the Pioneer Euro High Yield fund, in the high-yield sector, which saw €346m of inflows.

Elsewhere, investors were shifting out of US Dollar-denominated fixed income funds with the US Dollar high yield bond sector seeing €4.3bn of outflows in the first three months of the year.

BlackRock was also hit in the month, with the asset manager seeing some of the highest outflows for the month, of €476m from its long-term funds, while it lost €1.3bn from its equity funds.