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Morningstar: European funds shed €25bn in July

‘Equity and commodities hardest hit, while alternatives and fixed income were comparatively stable’

Loose falling sand


Pete Carvill

Long-term Europe-domiciled funds lost €25.1bn in July, according to new research from Morningstar.

According to its latest Asset Flows Commentary: Europe report, money market funds had, over the same period, gained €5.9bn. Worryingly, even as passive fixed-income funds saw inflows of €5.4bn, all major asset classes saw net outflows. Equity funds were the hardest hit, bleeding €11.6bn.

In the report, Morningstar said: “Investor sentiment remained depressed in July amid ongoing concerns of high inflation, sky-rocketing energy prices, rising interest rates, supply bottlenecks, and a possible recession. Long-term Europe-domiciled funds shed €25.1bn for the month, and all major asset classes experienced net outflows. Equity and commodities were the asset classes hardest hit, while alternatives and fixed income were comparatively stable.”

Morningstar also reported outflows of €3.2bn within long-term index funds in July against €16.1bn in net outflows from actively managed funds.

It wrote: “On the active side, all asset classes suffered redemptions, while on the passive side, fixed income was the only main group that registered inflows. Passive fixed-income strategies attracted €5.4bn, while actively managed bond funds experienced their seventh-consecutive month of net outflows, with €7.7bn walking out the door. Active equity funds shed €9.1bn, and equity index funds lost €2.5bn. July, therefore, marked a trend reversal for passive equity funds: This group had been able to attract new subscriptions since May 2020.”

Investors, reported the firm, swerved commodities while corporate and government bonds were the two top-performing categories.

Regarding the former, Morningstar said: “Investors shunned commodities in July, reflecting that energy, agricultural, and metal markets had recently calmed down after the monthslong bull run. Supply and logistics have somewhat improved. In addition, the strength of the US dollar pressured quotations.”