Bond and money market funds lead as European mutual funds see EUR96bn inflows in May 

European equities

European mutual fund flows enjoyed a dramatic rebound in May, with the latest data from Refinitiv showing bond funds and US dollar money-market funds back in favour as investors made a cautious return to markets in the wake of the coronavirus sell-off in March.

Bond funds were the best-selling long-term asset type for the month, posting inflows of EUR29.6 billion, followed by equity funds with EUR7.9 billion, and mixed-assets funds with EUR5.7 billion.

Fund flows were also buoyed by commodities funds and real estate funds, both sectors that were hit hard by market volatility at the height of the pandemic, which saw inflows of EUR2.4 billion and EUR0.6 billion respectively.

Overall, mutual funds in Europe in May stacked up estimated net inflows of EUR96.1 billion.

“European investors bought further back into mutual funds and ETFs in May after massive outflows from these products in March. Investors returned to the markets after they had somewhat stabilised after the massive stimulus packages by central banks and governments globally following the outbreak of Covid-19, which caused widespread worldwide lockdowns and stoked fears of a global recession,” says the report’s author, Detlef Glow, Lipper Head of EMEA Research at Refinitiv.

“Since the current market environment is still somewhat fragile, European investors bought more money market products. As a result, money market funds faced estimated net inflows of EUR28.2 billion.”

US dollar money market funds saw inflows of EUR22.7 billion, making it the best-selling sector within money markets segment, as investors rushed to protect their capital. This was followed by GBP money markets, with inflows of EUR9.8 billion.

At the other end of the spectrum, euro money market funds suffered the highest net outflows, totalling EUR4.2 billion, followed by Swiss francs and Swedish krona, which also saw outflows.

“Comparing this flow pattern with the flow pattern for February revealed that European investors further built up their positions in the US dollar and the pound sterling while selling the euro. In conjunction with the asset allocation decisions of portfolio managers, these shifts might have also been caused by corporate actions such as cash dividends or cash payments since money market funds are also used by corporations as replacements for cash accounts,” explains Glow.

Equity Global continued to be the best-selling sector in the segment of long-term mutual funds, with inflows of EUR6.2 billion, followed by Bond Global Corporates USD with EUR4.4 billion, and Bond EUR Corporates also with EUR4.4 billion. 

In terms of worst-performers, Absolute Return Bond EUR suffered the highest net outflows in the segment of long-term funds, losing EUR3 billion, followed by Equity Emerging Markets Global, which lost EUR2.9 billion, and Bond Convertibles Global with outflows of EUR1.8 billion.