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Absolute bonds flop as fund sales thrive

Absolute return bond funds suffered £190m of outflows across Europe during February, while mixed asset and pure equity absolute return funds saw inflows, according to figures from Lipper.

Mixed asset absolute return funds had inflows of £758m and pure equity absolute return funds saw £330m of inflows.

Total bond fund sales in Europe hit their highest business level since July 2005, with £16.1bn in sales.

High-yield bond fund sales were £5.4bn and total equity fund sales reached £5.2bn, dominated by global equity fund sales of £2.7bn.

Among emerging market funds, global products brought in £1.9bn while Asia Pacific fund sales were £1.2bn. Notable sales in country-specific funds include £379m into Russia funds and £296m into India funds.

Net fund sales of £23.7bn, excluding money market products, were the highest for 16 months. Significant redemptions from money market funds, with outflows of £10.2bn, meant the fund industry as a whole saw inflows of £13.5bn.

Whitechurch managing director Gavin Haynes says some absolute return bond funds have produced disappointing returns. He says: “It is quite difficult for managers to generate an absolute return using a single asset class. Bonds are lower-risk and so a lower-return asset class. This means they have to cover their fees before they start producing returns and that is quite difficult with bond yields so low at the moment.

“In the absolute return sector, we prefer multi-asset strategies that can allow managers to move between asset classes to try to add value.”

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