From January to May this year, some €27.5bn was poured into absolute return funds. The record amount of inflows even made it the most wanted asset class to date this year, taking the crown from European equities, which have seen demand cooling down consistently this year. Moreover, in each of the first five months of 2014 inflows were higher than they had ever been before.
Italy is one of the countries where absolute return products are very popular. In June alone, Italian investors poured €4.4bn into flexible and balanced funds, and another €911mln into hedge funds. Bond and equity funds registered only €1.5bn and €690mln of inflows respectively. A reason for the prevalence of absolute return is that retail investors seem to understand the product much better than only a couple of years ago and this is reflected in buying patterns, a fund selector from one of Italy’s biggest banks told our researcher upon his visit to Milan this spring.
Sentiment keeps up
The booming fund flows are reflected almost symmetrically in fund selector sentiment data gathered by EIE. Absolute return is the only asset class with net positive sentiment ever since we began measuring it in 2011 (see chart below). Besides of course Italy, fund selector sentiment towards the asset class is traditionally strong in France and some of the Nordic countries.
The data for the EIE Historic Fund Flows Database are provided by Morningstar.