Bond funds see outflows for first time since 2011

Sentiment towards bond funds took a hit in the third quarter after sales in Europe registered net outflows for the first time since 2011.

Net sales for Ucits funds in the third quarter totalled €34bn (£28.3bn) – up strongly from €12bn in the preceding three months – but bond funds were penalised as investors in the asset class focused on the prospects of tighter monetary policy from central banks, according to the European Fund and Asset Management Association (Efama).

While equity funds saw net sales of €30bn compared with €9bn of outflows in the three months before, fixed income products took a hit with their first net outflow since 2011 amounting to €12bn.

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The overall net sales figure of all Ucits funds was helped by a reduced net outflow of €9bn – down from €53bn of outflows in the second quarter.

“The third quarter was dominated by expectations of when the Federal Reserve will begin tapering its quantitative easing programme, which can be seen from the trends in monthly net sales,” the Efama report said.

“Bond funds didn’t really recover during the summer from chairman Ben Bernanke’s announcement on the phasing out of the Fed’s bond buying programme. Investors in equity and balanced funds gave less importance to this prospect, quite possibly because of encouraging economic data.”

Efama said the UK was one of four countries to attract net inflows of more than €5bn “thanks to strong net inflows to equity and balanced funds”. The other countries were Luxembourg with €13bn, Ireland with €12bn and Spain with €6bn.

The net level of assets in Ucits fund also increased by 3 per cent to nearly €6.7bn during the third quarter.

“Equity funds registered strong net asset growth of 7.8 per cent or €173bn to stand at €2.4bn at quarter end,” Efama said. “Net assets of balanced funds increased 2 per cent or €21bn during the quarter to €1.1bn. Bond fund net assets rose 1 per cent or €20bn to €1.9bn. In contrast, money market fund net assets reduced 1 per cent or €9bn during the quarter to €935bn.”

Efama said 24 countries registered growth in net assets during the third quarter of 2013. Of the largest, Luxembourg registered growth of 1.9 per cent, France 2.1 per cent, Ireland 2.7 per cent and the United Kingdom 5.5 per cent.