Investors flocked into bond funds in anticipation of interest rate cuts, according to the trade association for European asset managers, the European Fund and Asset Management Association (Efama).
Based on Efama’s Q1 2024 report, Thomas Tilley, senior economist at Efama, noted a significant shift towards bond funds “Investors flocked into bond funds in anticipation of interest rate cuts. Net sales of bond funds (Ucits and AIFs) reached €95 billion for the quarter, marking the highest volume of inflows since Q2 2017,” said Tilley.
Bond ETFs: Mastering today’s market
The report revealed that the net assets of Ucits and AIFs rose by 4.4% to €21.59 trillion. Ucits alone saw a 5.3% increase in net assets, aligning with stock market growth, while AIFs experienced a 2.7% increase. Overall, Ucits and AIFs attracted EUR 106 billion in net inflows, with Ucits contributing €97 billion and AIFs adding €9 billion.
Long-term funds saw robust net inflows of €85 billion, driven predominantly by bond funds. Equity fund sales were relatively modest at €3 billion, while multi-asset funds continued to experience net outflows of €15 billion, albeit a reduction from the previous quarter’s €46 billion outflows. Money market fund net sales slowed considerably to €21 billion, down from €121 billion in Q4 2023.
Fixed income ETFs saw strong inflows in May
Despite ongoing net outflows from the EU’s Sustainable Finance Disclosure Regulation Article 9 funds, long-term Article 8 fund net flows turned positive again, with net inflows of €19 billion compared to outflows of €27.1 billion in Q4 2023.
According to the data, institutional investors, especially insurers and pension funds, increased their fund acquisitions, contrasting with a negative trend among European retail investors in Q4 2023. This trend highlights the varying investment strategies and responses to market conditions among different investor types.
