Bond markets floating on central bank liquidity attract risk-averse investors to fixed income funds ______

21 Sep 2020

Inflows to fixed income funds were almost equal to all other fund categories combined in August, as investors continued to shun riskier assets, according to the latest Fund Flow Index from Calastone, the largest global funds network. Net inflows to bond funds were £454m out of the total across all fund categories of £920m. This was the fifth month in a row that has seen bond-fund inflows well above the long run average, generating an FFI: Bonds of 55.9, well above the neutral 50 mark where the value of buy orders equals sells. Even so, year-to-date, strong inflows into fixed income in nearly every month have barely compensated for the enormous £3.6bn that flooded out in March when the bond markets seized up at the beginning of the Covid-19 crisis.

Some key highlights from this month’s FFI:

  • Fixed income funds saw inflows equal to all other asset types combined in August as investors shun riskier assets
  • Equity funds saw only a £74m trickle of inflows driven by the first buying of European funds in two years, index funds and global funds (driven by the ESG category)
  • UK equity funds and income funds continued to suffer big outflows
  • August trading volumes were lower than usual for the summer lull as asset markets of all kinds were calmer than they have been all year

View this FFI Special Report in full

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