Fund flows take a turn for the better in Europe

Fund flows to European equity funds turned positive in August despite risk aversion and bearish sentiment among investors, according to figures from Lipper Feri. However, after weeks of rapid falls across global stockmarkets the positive mood is not expected to last.

Fund flows to European equity funds turned positive in August despite risk aversion and bearish sentiment among investors, according to figures from Lipper Feri. However, after weeks of rapid falls across global stockmarkets the positive mood is not expected to last.

Numbers in August were expected to remain flat, but inflows were boosted by €2.7 billion (£2.1 billion) from French investors. This was a bold turnaround for the European funds industry, which has suffered equity redemp- tions of over €17 billion since the credit crunch started a year ago.

The boost to inflows was said to be due to broad-based support for local, European and global stock funds.

Since August, however, the credit crisis has escalated sharply and the long-term repercussions are uncertain. A return to redemptions seems likely, according to Lipper Feri, but with most retail investors already having moved out to some degree, the scale of the redemptions could be stemmed.

Overall, European funds returned to positive net inflows in August, after two months of redemptions. However, the fact that Europe posted its first month of inflows since May does not necessarily hint at longer-term trends, the fund data group says.

The cautious stance taken by investors continued throughout August, with cash and cash equivalent products receiving increasing amounts of new money. Indeed, money market flows beat all previous records with inflows topping €18 billion.