Fixed IncomeMay 10 2013

Soaring bond fund sales deal blow to great rotation theory

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ByMatthew Jeynes

The latest data on European fund flows dealt a fresh blow to those hoping for a ‘great rotation’ from bonds to equities as sales to bond funds soared as those into equity funds plummeted.

According to Lipper, sales of bond funds across Europe reached €17.3bn (£14.6bn) in March, up by €6.4bn compared to February, while sales of equity funds dropped by €3.9bn to €5.6bn.

Emerging market debt and flexible bond funds once again dominated bond sales, while even euro-denominated bond funds have begun to see inflows pick up.

UK equities proved a particular drag on equity fund sales, suffering €1.2bn of net outflows in March.

However, the figures showed that investors were pouring money into smaller companies equity funds at the fastest pace since Lipper’s records began in 2002.

In the first quarter of 2013, smaller companies funds brought in €6.2bn in net sales, with money flowing into strategies from across the globe, from UK and US small caps to Asia Pacific funds as well.

Ed Moisson, head of cross-border research at Lipper, said the smaller companies flows suggested “investors’ interest in equities is taking deeper root – even if the headline figures for overall equity sales are less encouraging”.

Overall, net fund sales hit €32.4bn in March, marginally up from €32.2 in February, while total assets increased by 4.7 per cent to €6.2trn in the first quarter of 2013.