Emerging Markets See Strong Interest from European Investors: Morningstar Fund Flows Analysis

Global emerging-markets equity funds saw strong inflows again in September, with EUR 3.4 billion of new assets invested in large-cap funds and another EUR 227 million in funds with a small- and mid-cap focus in emerging markets. For the quarter ending 30 September, globally diversified emerging market equity funds saw total inflows of EUR 10.2 billion, translating into growth rates not seen since 2012.

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Funds in the global emerging-markets bond Morningstar Category saw inflows of EUR 8.2 billion during the third quarter, surpassing the previous record for a quarterly tally from 2014. The inflows into hard currency funds were accompanied by inflows of EUR 5.1 billion into local-currency denominated global emerging-markets bond funds.

Although European open-ended equity funds saw relatively minor outflows of EUR 1.6 billion in September, equity funds have lost EUR 71.7 billion to outflows year-to-date. Active funds have seen outflows of EUR 83.1 billion whilst open-ended index funds have received EUR 11.4 billion of new assets year-to-date.

Further findings from Morningstar’s fund flows report for September include:

  • Altogether European long-term open-end funds saw inflows of EUR 15.6 billion during the month, with fixed-income funds seeing inflows of EUR 10.1 billion.
  • Year-to-date the most popular alternative multi-strategy fund by far has been the Luxembourg-domiciled version of JPMorgan’s Global Macro Opportunities strategy. The fund has amassed EUR 5.7 billion year-to-date, with the UK-domiciled version of the strategy seeing additional inflows of EUR 814 million.
  • Japanese large-cap equity funds have now seen outflows in eight consecutive months, with outflows of EUR 8.6 billion year-to-date, as investors have turned more pessimistic on the prospects of the country’s economy after the yen’s appreciation erodes the competitiveness of Japanese exporters.
  • Within global bonds, Templeton’s two giants, Global Bond and Global Total Return, lost a combined EUR 4.5 billion to outflows in September, more than the rest of the funds in the category combined.

Matias Möttölä, SeniorManager Research Analyst for Morningstar, comments:

“Emerging markets are drawing the interest of European fund investors at a pace not seen in years. The last time we saw inflows of this magnitude was in 2012 when investors were then returning to emerging markets after the scares of the 2011 Eurozone crisis. This year’s flows are motivated by strong recent returns, rising emerging currencies and the relatively lower valuations of emerging-market stocks compared to developed markets. Emerging-markets funds are also going against the tide of large outflows from actively managed equity funds seen in other categories.

Additionally, the lure of emerging markets is not limited to equity funds, but can be seen in strong fixed-income inflows as well.”

For the full report, please click here.

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Om forfatteren

Matias Möttölä, CFA

Matias Möttölä, CFA  Matias Möttölä, CFA, on Morningstar.fi-sivuston päätoimittaja ja rahastoanalyytikko

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