Relief over the accord on a third bailout for Greece and forecast-beating earnings reports encouraged European investors to jump back into long-term funds in July. European open-end funds excluding money market funds gathered a total of EUR 25.97 billion of new assets during the month, with both the equity and bond markets rallying across the developed world after suffering losses in June.
Equity funds in particular benefited from investors’ newfound risk appetite with inflows of EUR 8.29 billion during the month. That tally is higher than in any month since July 2014. However, the positive effects of the eurogroup compromise to avoid a "Grexit", reached on 13 July, was mostly limited to developed-markets funds. Emerging-country funds saw outflows stemming from worries over China’s growth, mounting pressure on emerging currencies from a looming Chinese devaluation, and the U.S. Federal Reserve’s intentions to raise interest rates. As the Chinese A-Share market fell a dramatic 14.5% (in USD terms), it was no wonder that funds in Morningstar’s Chinese equity categories (China equity, greater China equity, China A-Shares equity) were hard hit, with outflows totaling EUR 2.12 billion.
Apart from equities, funds in Morningstar’s alternative and allocation categories profited from yet another strong month of inflows. After taking in EUR 9.03 billion of new money in July, European alternative funds have now amassed a total of EUR 51.60 billion in net flows for the year to date. Net inflows to alternatives through July surpass the asset-class calendar-year record intake of EUR 46.2 billion reached in 2014.
July brought mixed news for bond funds. European bond investors enjoyed mostly positive returns as yields compressed after the Greek compromise. However, with the German 10-year bund ending the month with a lowly yield of 0.65%, long-term prospects for the fixed-income market remained subdued. In this light, it was not surprising that money market funds posted a strong month with EUR 21.38 billion of inflows, whereas bond funds saw EUR 591 million walk out the door.
