Absolute return funds in Europe had the highest outflows out of 20 Morningstar categories in January 2019 at €6.7bn, according to the research house’s data.

The category has experienced five consecutive months (September 2018 to January 2019) of outflows amounting to €35.2bn since the high-profile liquidation of Swiss asset manager Gam’s €9.5bn absolute return fund range in August.

When the data was broken down further, absolute return funds domiciled in either Ireland or Luxembourg lost €5.2bn in January, and lost €35.8 over the year to January 2019.

Sentiment rapidly falling

According to Last Word Research European fund buyers have continued their dislike for the asset class with 11% looking to decrease their allocations, 22% to increase, 42% to hold, and 25% did not use the asset class.

“The direction of travel for absolute return products continues its strong, consistent decline. Having said that, there are still more buyers than sellers,” the research said.

“We can see appetite for specific strategies, but the direction of play is clear – fund buyers are no longer impressed just because something calls itself ‘absolute return’.”

The research also found that French and Swedish fund selectors were the most interested in absolute return funds. Among French selectors 44% were looking to buy the asset class, 11% to sell,33% to hold, and 12% did not use the asset class.

Similarly, 44% of Swedish selectors looked to buy, 38% to hold, and 18% did not use the asset class. No Swedish selector looked to decrease their allocation.

Belgian selectors were the least impressed with absolute return strategies as 9% looked to buy, 27% to decrease, 36% to hold, and 28% did not use the asset class.

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