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Investors favour bond funds in Feb, says Morningstar

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Investors added more than EUR15 billion in new assets to long-term European-domiciled funds in February, according to Morningstar’s European fund flow data for the month.

Fixed-income funds were February’s biggest winners, pulling in EUR12.5 billion, the asset class’s highest inflow figure since August 2010.

Funds focused on corporate debt dominated bond fund inflows, with funds in the Morningstar Euro Corporate Bond category seeing the greatest inflows, followed by several high-yield categories.

Pimco, M&G and AllianceBernstein were all big beneficiaries of inflows to bond funds, while fixed-term bond funds sold in Italy also saw large inflows.

Allocation and Convertible funds were also popular. Convertible bond funds enjoyed their first month of inflows since April 2011; M&G Optimal Income led all allocation funds with EUR501 million in new assets.

Equity funds saw net redemptions, returning to a longer-term trend of outflows with some EUR189 million redeemed in February; funds investing in Europe, the UK and the US were particularly unpopular.

Money market funds also saw notable outflows in February, giving up some EUR13 billion during the month.
 
Dan Lefkovitz (pictured) from Morningstar’s European research team says: “After sending money into funds of all types in January, European investors were more selective in February. Whilst equity funds saw outflows, fixed-income funds saw their strongest inflows since August 2010, led by corporate debt offerings. Investors are clearly hungry for yield and consider corporate balance sheets to be healthier than those of Western governments.”

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