Yield-hungry EU investors flock to bonds
EUROPEAN investors are fuelling a “bond boom” in their hunt for income, but they are shunning western government bonds in favour of high yield and emerging market debt.
A report by Morningstar, the funds data company, shows that while European equity funds lost €1.3bn in assets under management in March, bond funds gained €13.9bn, with the lion’s share going into emerging market government bonds and high-yield American corporate debt.
Dan Lefkovitz, Morningstar analyst, said: “The money coming into these funds is mostly from Europe but the funds getting the flows are global. They’re diversifying.”
Equity funds are losing out, however, showing that investors would rather bag income than bet on capital values rising.
The biggest flows were into money market funds (MMF), demonstrating the ongoing demand for liquidity. MMFs are seen as a separate asset class from other funds because, like deposits, their primary attraction is their liquidity rather than their investment value. Such funds saw net inflows of €10.4bn in March.
But Lefkowitz warned that the flows could be seasonal: last year also began with a bang for high yield bonds, only to be followed by a rout as the Eurozone crisis ramped up and investors lost confidence in all but the most traditional “safe haven” assets.