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European fund flows back in the black

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European fund sales bounced back into positive territory in January at EUR34bn following December’s outflows, according to a report by Lipper FMI.

Business was at its highest level since last August, but was virtually identical to flows in January last year.

The major difference between this year and last is the make-up of fund sales. Last January business was heavily weighted towards money market funds due to the flight to safety in response the financial crisis. In the first month of this year, liquidity funds hardly featured as investors looked elsewhere for higher returns.

Continuing the trend set last year, the best-selling asset class in January was fixed income which accounted for over a third of total flows.

Emerging market bonds was the most popular sector, knocking corporate investment grade bond funds firmly off their perch.

Having been the worst performing market in December, France became the best selling domestic market in January. It was its first month of positive sales since last August. The French market is typified by seasonal activity which tends to result in heavy money market outflows in December followed by large inflows in January.

However, not only were the outflows higher in December, but this January’s EUR4.3bn flows were meagre compared to previous years when flows had exceeded EUR20bn. Low returns on cash funds have forced a change of appetite. As a result, business was more widely spread across other asset types, with only French property funds failing to attract positive flows.

The second best selling asset class across Europe in January was equities. However, sales were 40 per cent down on December’s level at EUR9bn. The best domestic market for equity sales was Switzerland.

Mixed asset funds, by contrast, saw increased sales in January of EUR6.3bn, their highest since early 2006. Flows into these funds have risen consistently since last April. They have proved particularly popular recently in Italy and Germany.

Groups with the strongest net flows were Franklin Templeton, BlackRock and Carmignac with EUR1.7bn, EUR1.67bn and EUR1.5bn respectively. In the equity stakes, BlackRock was the clear leader with sales of EUR1.4bn.

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