The Great Rotation has been a hot topic since Christmas but seems slow to materialise
The Great Rotation — the move from bonds into equities — has been a hot topic since Christmas. The story runs that if the economic environment improves then this shift will ensure that City profits swell.
As written in March, wealth managers have, however, been long on optimism but short on conviction to date. It’s interesting to note therefore that Lipper’s latest monthly snapshot of European fund flows shows the trend continuing.
Although the European funds industry enjoyed inflows of €52.5bn in April —only the third time in five years that the monthly total exceeded €50bn — that increased appetite wasn’t echoed in the asset class breakdown.
Bonds set a new one month net sales record of €35.4bn, beating October’s total which was the largest total since Lipper began monitoring European fund flows in 2002. Meanwhile, equity fund sales fell to €2.8bn.
As Ed Moisson, Head of UK & Cross-Border Research, says, ‘Quite simply there has not been a great rotation in the European funds industry and neither, for that matter, in the United States.’
‘That said,’ he continues, ‘the sheer volume of fund flows, the general move out of money markets funds and the increased sales of bond and mixed asset funds suggest that significant amounts of money are coming off-the-sidelines.
‘Specifically, in the UK, the aversion to funds investing in UK stocks continues, but this has masked the fact that there has been pretty healthy interest in Global and Emerging Market equity funds in particular, up from €6.4bn to €6.7bn between March and April this year.’