Fixed-income dominates February fund flows, Morningstar finds

European long-term investors piled into fixed-income portfolios, according to the latest data from Morningstar.

Stuart Rhodes
Stuart Rhodes

The Morningstar Direct Europe Asset Flows Update reveals that long-term funds captured inflows of more than €15 billion (£12.5 billion) in February – with fixed-income vehicles taking the bulk of this money and equity portfolios being hit with outflows.

Fixed-income benefited from inflows of €12.5 billion last month – the strongest since August 2010.

Yield remained a strong theme on the equity side, as equity income funds remained attractive to investors. Stuart Rhodes’ £2.5 billion M&G Global Dividend fund took more than €400m during February. However, despite interest in the equity income sector, as a whole equity funds, reportedoutflows of €189m.

February also saw allocation, commodities, convertibles and property funds achieve inflows, although alternative portfolios lost assets. Money market funds saw outflows of over €13 billion.

Morningstar says: “A few trends are evident. First, investors are far from bullish. Persistent uncertainty, especially in Europe, is stifling flows to equities.

“Second, investors are hungry for yield. Interest rates are low and show little sign of rising. Bond flows were dominated by corporate debt, especially of the high-yield variety.”

In January, Morningstar reported inflows of €13.1 billion into long-term funds, with fixed-income vehicles taking close to €7 billion and equity products winning €3.4 billion.