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Risk averse investors flocking to safer asset classes, says Morningstar

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The latest Morningstar European asset flow data shows that investors shifted towards safer assets in May.

With the eurozone crisis roiling markets, long-term funds in Morningstar’s European database saw net outflows of nearly EUR9 billion during the month; conversely, investors deposited some EUR15 billion into money market funds, and EUR855 million into allocation funds. The flight to safety saw flows to the global emerging-markets equity category turn negative for the first time since November 2011.
 
Key findings from Morningstar’s May asset flows data are:

European long-term funds saw net outflows of nearly EUR9 billion;

Equity funds sustained the greatest outflows, shedding EUR12.5 billion in investor assets;

Alternatives-focused funds saw EUR1 billion in outflows;

Commodities and convertibles funds had net redemptions;

Short-term funds attracted  EUR15 billion in assets;

The USD money market-short term category collected inflows of  EUR11 billion, making it the most popular of Morningstar’s money market categories; funds in the euro money market category took in EUR7 billion; the Morningstar GBP short-term money market category saw outflows of EUR4 billion;

Bond funds suffered their weakest month year to date, but still benefitted from May’s risk aversion, receiving nearly EUR5 billion in inflows;

Allocation funds received net inflows of nearly EUR855 million;

Flows to funds in the Morningstar global emerging-markets equity category turned negative for the first time since November 2011; China equity saw EUR905 million in net redemptions; Asia ex-Japan equity saw EUR386 million leave its funds; and Europe equity saw outflows of EUR263 million;

Among emerging-markets equity funds, Luxembourg-domiciled Aberdeen Global Emerging Markets was the most notable casualty at the fund level; before May, the fund enjoyed inflows in 34 of the 35 previous months, but suffered EUR220 million in net investor redemptions in May;

Europe’s largest long-term fund, Templeton Global Bond, saw its ninth consecutive month of outflows in May; in contrast, PIMCO GIS Total Return Bond attracted nearly EUR800 million in May, the fund’s strongest month of inflows since October 2010;

Investors in safe-haven countries largely stayed the course. UK investors redeemed EUR244 million in May, but have contributed a net EUR3,721 million to long-term funds year to date; conversely, investors in Spain pulled EUR2,489 million from long-term funds from an asset base that is one-fifth the size of that of the UK.
 
Dan Lefkovitz (pictured) from Morningstar’s European research team says: “Market turmoil triggered real risk aversion in May, with European money flowing into money market funds and out of emerging markets stocks and bonds. Nevertheless, the flight to safety is not as pronounced as in August 2011, when European investors pulled 
EUR25 billion from the broad asset class, or September 2011, when EUR13 billion was redeemed. However, May’s outflows have erased what had been mildly positive flows to equity funds during the first four months of the year.”  

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