Antje Schiffler, editor, Morningstar said: ” Bond funds attracted a solid EUR 32.3 billion in net inflows in July, the group’s ninth straight month of inflows. This reflects a strong appetite for fixed-income strategies amidst varied global equity market performances.

” Equity funds attracted EUR 15.6 billion of net inflows in the month. This was entirely attributable to passive equity strategies (€15.7bn), while active strategies recorded net outflows of EUR 30 million.

Global large-cap blend equity funds were by far the top sellers in July. US large-cap blend equity funds also continued to be popular with European investors. This category posted the highest inflows since March 2023.“

In the first seven months of the year, Europe-domiciled long-term funds experienced €186bn of flows while equity funds attracted € 15.6bn of net inflows in the month.

Fixed-income strategies raked in €32.3bn of net inflows in July, with active bond funds attracting €22.9bn.

Allocation funds continued their 14 months long losing streak and shed €2.8bn. Meanwhile, alternative funds attracted €167m in net inflows.

Article 8 funds recorded their second-strongest result since January 2023, garnering €14.5 billion, but Article 9 funds on the other hand continued to bleed and shed €2.8bn in July. This marked the tenth consecutive month of net redemptions for these funds.

Global large-cap blend equity was again the top-selling Morningstar Category in the month, gaining €13.4bn, followed by US large-cap blend equity.

On the other end of the spectrum eurozone large-cap equity strategies lost most money (€1.93bn), followed by other equity (€1.9bn).
IShares topped the rankings of asset-gatherers, followed by Nordea. Eurizon and Aviva were the biggest laggards of the month. Pimco GIS Income, the second largest actively managed fund in Europe, had inflows of EUR 1.3 billion in July, while Vanguard Global Bond Index had the greatest outflows, down EUR 1.3 billion. Money market funds had EUR 27.5 billion in net inflows.

Assets in long-term funds domiciled in Europe increased to EUR 12.2 trillion by month’s end from EUR 11.9 trillion at the end of June.

The MPS will initially come to the Parmenion, M&G and Morningstar platforms, with more expected to follow shortly after.

WealthSelect has grown to reach £14bn in assets under management over its 10 years in operation.

It has been managed by portfolio manager Stuart Clark since inception. Bethan Dixon joined Clark in 2022 following an expansion of the range, with Helen Bradshaw also becoming a portfolio manager in 2023.

The MPS began as active and blended portfolios only, but in 2022 passive portfolios and a range of responsible and sustainable investment options were added.

Steven Levin (pictured), chief executive of Quilter, said: “WealthSelect has been a real success story in terms of helping clients achieve their financial goals over the past decade.

“MPS solutions are now a crucial part of the adviser toolkit and we provide one of the most comprehensive solutions in the market. We want advisers to have greater access and choice and thus the time feels right to add WealthSelect to other platforms.”

Clark added: “Despite the challenges the market has thrown up over the years, WealthSelect has continued to deliver good risk adjusted returns. There has been a huge amount of upheaval in the past decade with the likes of the Covid pandemic, Russia’s invasion of Ukraine, the Brexit referendum and the most aggressive rate hiking cycle in history.

“The next decade shows no signs of slowing down, but I am excited to see advisers have even greater access to WealthSelect as we roll it out across the platform market.”

Twelve months ago, 85% of economists and market analysts expected the US and global economy to fall into a recession and investors were voting with their feet – equity fund outflows in 2023 ended up being both protracted and significant.

Yet a recession did not transpire and equity markets delivered a decent set of positive returns for investors, especially in the US.

Today, the market is leaning more towards an expectation of lower inflation, no recession and significant interest rate cuts. This is a goldilocks-like scenario that is far from guaranteed, and there are early signs already in 2024 that investors may be stepping back from this narrative.

Documenting a market outlook is always a humbling experience and we don’t claim to hold a crystal ball in our market assessments. The experiences of 2023 are a good example how difficult it is to make precise macro forecasts.

See also: Baroness Dambisa Moyo: Why traditional multi-asset portfolios may lose their shine

The investment arena may appear daunting given these macro-economic uncertainties, but we are seeing many exciting investment opportunities which warrant capital in a multi-asset portfolio. Within equities, overall market multiples appear reasonable – running not too hot, and not too cold – with all major countries better placed than they were a few years ago from a valuation standpoint.

US equities should continue to play an important role in portfolios, although the concentrated rise in the Magnificent Seven has created opportunities to add selected value, which looks especially interesting in smaller, value-oriented companies.

One long-term risk is the lack of earnings growth. Last year we saw stock prices rising in the United States due to multiple expansion, rather than due to earnings uplifts.

One potential reason for the expansion of multiples this year was a belief that central banks would quickly and aggressively pivot to rate cuts. However, markets are currently pricing in five interest rate cuts in 2024, which appears quite optimistic to us.

Financial services, squarely a cyclical value-leaning sector, leaps out as inexpensive with low expectations. Rising rates and the 2023 US banking crisis led the sector to underperform. We believe much of the risk here has been discounted and that US banks are worth a look.

Outside of the US, the broad opportunity in emerging markets has grown more significant during 2023 as those stocks have lagged their developed-market peers.

Much of the performance drag can be attributed to Chinese stocks as investors weighed looming geopolitical and secular growth concerns. The aggregate sentiment toward emerging markets remains bearish in absolute (compared with its own history) and relative terms (compared with developed markets). As a result, we are happy to allocate capital to emerging markets, with a focus on Asia.

See also: Head to head: Will the year of the dragon herald better times for China?

Fixed income is perhaps even more interesting than equities given the level of starting yields – which historically are highly correlated with returns – are near the highest levels since the global financial crisis. Real yields also remain elevated as inflation continues to abate.

An interesting feature of the yield curve is that the inversion remains pronounced and therefore yields on short-dated bonds exceed those of long-dated debt.

For investors with a more cautious mindset or shorter time horizon, we see short-dated bonds having appeal. However, if we do see inflation risks continue to recede, it may not be possible to lock in today’s long-term rates in the future. For investors with longer horizons, we would suggest exposure across the maturity profile and our portfolios’ duration is longer than it has been for many years.

We believe there is no need to stretch for yield. We prefer investment grade risk to high yield, with the latter offering investors relatively tight credit spreads when compared to historical averages. Corporate fundamentals look solid, and near-term refinancing risk is low, but we prefer allocating risk to other parts of the investment universe.

Mark Preskett is senior portfolio manager at Morningstar

This article was written for our sister title Portfolio Adviser

In fact, a finish line has not even been marked out on the course. Consumer Duty was a key phrase used in 2023 but don’t think you’ll hear any less of it this year – if anything, it will be referred to more frequently.

With the Financial Conduct Authority having invested a lot of time and effort into the new rules, it is going to be looking very closely at how firms are putting consumers’ needs front and centre.

There was a lot of attention on Consumer Duty in the run up to the open book implementation date in July last year, but anyone who thought that marked the end of the race was mistaken.

The regulator is not afraid to hammer home its message that Consumer Duty is “not a once and done exercise” and I can understand why.

Keep on running

The regulator says consumers are already reaping the benefits of the changes made so far. These include the development of new data to measure outcomes, ensuring the right products reach the right customers and improving communication to boost consumer understanding.

But it wants to go much further. It hopes that with higher standards and more firms innovatively competing for consumers, we will see greater trust and confidence in markets which in turn will support economic growth.

FCA director of cross cutting policy and strategy Nisha Arora strongly hinted that we should all challenge ourselves on whether the implementation exercises that were carried out have “really delivered what’s needed”.

See also: All I want for Easter is the findings of the FCA’s thematic review

None of it should be viewed as a tick box activity. Instead, it needs to be reviewed on an ongoing basis.

While no medals will be handed out for this marathon, the regulator suggests “the prize is huge if we can get this right”.

It can be easy to get so caught up in the policy, process and system changes required by the Duty that companies risk losing sight of the consumers we are here to serve. It’s paramount that does not happen.

According to Arora, the Duty is an “integral part” of the FCA’s approach and mindset at every stage of the regulatory lifecycle from authorisation to supervision and enforcement. It is a “golden thread” that runs through all its work, so we can expect to keep hearing about it.

As we all line up for the start of this marathon, we must each interpret the rules of the race and apply it to our own businesses, customers and circumstances. The FCA will highlight good and bad practice along the route, but it won’t tell us what running style we should adopt or what trainers to wear.

See also: Defaqto launches Consumer Duty profiles

One thing for certain is the regulator is taking the Consumer Duty seriously and its message to firms is to do likewise. We will all need to try to keep up the pace and no doubt navigate a few hurdles and obstacles as we do so.

It is the regulator’s hope that the work we have all put in to implement and embed the Consumer Duty means we will spot problems before they arise. We have to take the initiative without relying on the regulator to tell us what to do.

But just because there’s no finish line in sight doesn’t mean we can’t all keep working on our personal best.

On your marks, get set, go.

Steve Owen is director of product management at Morningstar Wealth

This article was written for our sister title Portfolio Adviser

Researchers at the firm noted in the report titled ‘Multi-Asset Investing: A Difficult Sport’ that many multi-asset funds have struggled to beat their benchmarks in recent times.

They noted the average ‘moderate’ global allocation Morningstar category fund trailed the euro moderate global target allocation index by 2.19% annualised over the past 10 years.

See also: It’s time for multi-asset managers to ditch bond proxies

The lure of the balanced portfolio has been its ability to limit losses in challenging stock markets through bonds’ negative correlation, the report noted. But in 2022, both stocks and bonds lost ground.

This led some to suggest the 60% equities, 40% bonds portfolio is past its due date, Morningstar said. The stock/bond correlation changes through time and, besides correlations, valuations matter. At the start of 2024, the bond market has been repriced and is now offering some of the highest yields seen for a long time.

Thomas De fauw, senior manager research analyst, and author of the report, said: “Strategic asset allocation is the main driver of a portfolio’s return and explains a great deal of the excess performance versus the benchmark. Looking at the European multi-asset universe we see a broad range of allocations in each of our categories.

See also: Chancery Lane CEO: Modern portfolio theory doesn’t work for income investors

“But benchmarking a multi-asset strategy differs substantively from a strategy focused on a single asset class as the many dimensions of multi-asset strategies complicate the analysis. Moreover, for objectives-oriented funds, such as multi-asset income or environmental, social, and governance-focused funds, there’s a specific investment outcome to consider.

“All the work that goes into achieving those goals is not always captured through benchmark-relative performance, nor is it always clear which benchmark to choose,” he added.

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