The hunt for yield by European fund investors continues with record inflows into long-term open ended funds in the first quarter, according to Morningstar’s latest European asset flow data.

Funds saw inflows of €115.1bn in the three months to the end of March. Money market funds, meanwhile, saw outflows – a sign investors preferred yield to safety despite the Eurozone crisis, according to the investment data provider.

Investors, however, continued to focus on fixed income, with inflows of €15.1bn over the period, while equity funds saw net inflows of only €4.2bn. Allocation funds gained €8.8bn.

Ali Masarwah in Morningstar’s European research team said: “We’re still awaiting a strong indicator of a ‘great rotation’ out of bond funds. Flows into equity funds receded for the third consecutive month, but bond funds posted a month-over-month increase March. Although their appetite for equity funds remains muted, investors continued to pour money into risky assets. Investor preference for debt over equity is also highlighted by substantial inflows for allocation funds in March.”

High-yield bond funds, emerging-markets bond funds, and “go-anywhere flexible bond funds remained very much en vogue”, according to the commentary. Inflows to allocation funds also tended to favour those that were bond-heavy.

USD and Euro diversified bond and UK large-cap blend equity funds posted the highest outflows in March. Following heavy outflows in March Eurozone large-cap equity funds have now suffered outflows in 30 of the last 36 months, Morningstar added.

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