Fixed income attracts $132 billion in third quarter, asset managers snap losing streak

LONDON (Reuters) - Fixed income products attracted $132 billion of net inflows in the third quarter, the latest data from research provider eVestment showed on Tuesday.

Although there has been talk of a "great rotation" out of deflation plays such as bonds and into assets expected to do well as inflation rises, investors continued to dump equities in the third quarter, withdrawing a net $116 billion, eVestment's data showed.

The firm, which tracks more than $37 trillion in institutional money globally, aggregates data reported to it by asset managers overseeing money for pension funds, insurers, sovereign wealth funds and foundations.

This showed that fixed income products found favor after four consecutive quarters of net outflows, attracting $66.8 billion of net inflows to U.S. bonds and $18.3 billion into U.S. corporate bonds.

Emerging market debt strategies attracted $12.4 billion. Institutional assets invested in emerging market debt totaled $480.5 billion at the end of the third quarter, a two-year high.

But investors pulled money from equity strategies for a seventh consecutive quarter, with $80.3 billion withdrawn from U.S. equity and $10 billion from global equity strategies.

An outlier was emerging market equities, which attracted $9.3 billion, with European investors the driving force behind the inflows, eVestment said.

Overall, institutional asset managers attracted $19.7 billion in the third quarter, although some clients, such as sovereign wealth funds, remained net sellers for a ninth consecutive quarter.

These withdrew a net $5.2 billion, after outflows of $19.3 billion in the second quarter. Redemptions were led by $2.9 billion in net outflows from global equity strategies, with the passively managed funds bearing the brunt of the withdrawals.

Sovereign investors also cut European equity strategies by $1.8 billion, Japanese equity strategies by $1.2 billion and U.S. equity strategies by $1.2 billion.

Public funds pulled out some $25.2 billion, and foundations and endowments withdrew some $5.3 billion.

The firm also noted that, whilst U.S. domiciled accounts reported $123.6 billion in outflows, investors in Europe and the UK were net buyers, with inflows of $41.7 billion and $3.7 billion respectively.

"The uncertainty in Europe regarding the Brexit decision has led to an influx of assets into cash management strategies, both in the UK and Europe," eVestment said.

European cash management funds reported inflows of $23.3 billion, while UK cash management funds had net inflows of $9.3 billion.

(Reporting by Claire Milhench; Editing by Kevin Liffey)

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