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Investors find their way back to European equities

As European equity indices finally showed signs of life in December, investors again started to commit money to the asset class. European equity funds saw their first net inflows in 11 months according to Morningstar data.


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The Euro Stoxx 600 Index rallied 8.3%in December, its strongest monthly performance since October 2015. European fund investors invested €1.6bn net new money in European equity funds over the month.

All of the net inflows could be attributed to passive vehicles though, as investors are not convinced 2017 will be the year of active managers. Actively managed funds continued to see net outflows in December, despite claims that active managers are set to finally reap the benefits of increasing volatility this year.

US equity flows continued to be boosted by the Trump-effect, though net inflows fell from €6bn in November to €2.5bn last month. Active managers absorbed about half of these inflows. The only asset class to attract larger sums of money than US equities was global high yield, which saw about €4bn in net inflows over the month.

The popularity of developed market assets, which is confirmed by Expert Investor asset allocation sentiment data, contrasts sharply with the selling spree that has hit emerging markets since Donald’s Trump election. European investors have withdrawn more than €19bn from EM equities and bonds in the final two months of 2016.