Morningstar: Fixed income funds see highest net flows in five years

July marked the best month for inflows into long-term Europe-domiciled funds since January 2023

Fixed income concept. Types of investment security that pay investors fixed interest or dividend payments until their maturity date. Finance business conceptual. Money bag.

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Fixed income funds attracted 42.6bn in net inflows during July this year, according to Morningstar’s latest European Asset Flows report, marking the highest uptick in capital allocation since June 2019.

This accounts for 88% of total net flows experienced throughout the month, with €48.4bn being allocated to long-term Europe-domiciled funds in July in total.

This means European funds experienced the highest monthly net flows since January last year. Year-to-date, investors have poured €188.7bn into European-domiciled funds, meaning that July alone accounted for more than a quarter of 2024’s flows.

Elsewhere, equity funds saw €10.1bn of inflows during July, which was “entirely attributable” to passive funds, according to the report. While passive strategies netted €12.5bn in flows, actively-managed funds suffered net outflows of €2.4bn.

See also: Morningstar: 70% of clients choose savings over investments

‘Allocation’ funds lost €2.9bn during July, marking its 14th consecutive month of outflows. Article 9 funds also lost €797m, making last month the tenth month in a row it has suffered losses.

On the other hand, Article 8 funds saw their biggest monthly net inflows in more than a year at €20.5m, while alternative funds netted €236m in inflows.

In terms of Morningstar categories, the global large-cap blend equity sector fared best during the month with net inflows of €13.9bn, while Japan large-cap blend equity strategies lost the most money at 3.3bn.

Overall, assets in long-term Europe-domiciled funds came in at 11.98trn by the end of July, compared to 11.9trn at the end of June.  

See also: Morningstar says UK multi-asset portfolios have recovered 2022 losses

Antje Schiffler, editor at Morningstar, said: “In July, investors funnelled €48.4bn into long-term Europe-domiciled funds, marking the best monthly inflow since January 2023. This surge reflects a strong appetite for fixed-income strategies amid varied global equity market performances.

“Notably, active fixed income strategies attracted €32.7bn, driven by a robust interest in Asian local currency bonds. Meanwhile, investors withdrew €3.3bn from Japanese large-cap equities, making it the category with the largest outflows in July, while global large-cap blend equity once more was the category that saw the largest net inflows.”

This story was written by our sister title, Portfolio Adviser