Research by
Morningstar reveals that equity funds
saw net inflows of €1.91 billion (around $2.48 billion) in September, the first
month of positive investments since February 2012. Morningstar observes that this ends a long
period of disconnect between investor behaviour and equity market performance,
but concludes that investors are still treading carefully.

Within equities, the more
broadly diversified funds attracted the greatest net asset flows. Global
emerging markets posted the highest net inflows, attracting €1.75 billion in the third
quarter, of which €1.42 billion was in September. Global large cap blend and global large cap value funds were also
popular. Single country equity funds were generally out of favour with US and
UK large cap blend funds being sold, as were Asia and China equity funds.

Despite the resurgence of equity funds, fixed
income continues to dominate with €15.9 billion of new investments in September. The third-quarter
net inflow of €53.24 billion was the highest
quarterly intake for bond funds since 2007.

Although
high yield funds – both US and global - saw sizeable inflows, Morningstar says
that investor sentiment is still risk averse. According to Ali Masarwah
from Morningstar’s European research team, “people are buying high yield bonds because
they don’t have any alternative”. He explained that these higher risk funds are
the only source of the yields investors are looking for.

Morningstar’s
report on September asset flows was compiled on October 19,
2012. It includes over 23,000 of the 29,000 funds that Morningstar tracks from
1,100 fund companies across 29 domiciles.