Despite concerns over persistent inflation, geopolitical tensions, surprising election outcomes, and a slowing Chinese economy, European investors have maintained a positive outlook, driven by optimism surrounding artificial intelligence and potential interest rate cuts by major central banks. This article delves into the investment strategies that have caught the attention of European investors and highlights some surprising trends from the first half of the year.
Money Market Funds: Leading the Charge
At the asset class level, money market funds have continued their strong performance. In 2023, these funds saw inflows of 196 billion dollars, with an additional 69 billion dollars flowing in during the first six months of 2024. Investors are drawn to the more attractive interest rates these funds offer compared to traditional savings accounts. June alone saw over 28 billion dollars in new assets, bringing the 12-month organic growth rate to an impressive 15.7 percent, solidifying money market funds as the clear frontrunners.
Bond funds: Solid performer
Bond funds have also been significant winners, achieving organic growth of over 7 percent in the past 12 months, bolstered by net inflows of 166 billion dollars in 2024. This performance marks the fourth-best half-year for bond funds since 2007. Both actively managed and passive bond funds attracted investor interest, with passive funds seeing inflows of 39 billion dollars and active strategies pulling in 127 billion dollars. Fixed-term bond products were particularly popular, with 29 billion dollars in net inflows, while European corporate and government bond funds also performed well.
Equity strategies: Modest growth with high potential
Equity strategies saw net inflows of over 40 billion dollars in the first half of 2024, translating to modest growth given the total assets under management in this class, which stand at nearly 6,300 billion dollars. However, the asset class includes the Morningstar category with the highest inflows: global large-cap mixed equities, which recorded net inflows of over 67 billion dollars. Notably, passive funds in this category saw nearly double the inflows of actively managed strategies. US large-cap equity funds remained popular, while India emerged as a standout among emerging markets, attracting over six billion dollars in net inflows and achieving nearly 50 percent organic growth over the past year.
Spotlight on Goldman Sachs India Equity Fund
One fund that has significantly benefited from the growing interest in Indian equities is the Goldman Sachs India Equity Fund. This strategy saw over 560 million euros in new investor money in the first six months of 2024, pushing its assets beyond 4 billion euros. Morningstar fund analysts have a positive outlook on this strategy, highlighting its strong management team and robust investment process.
Lead manager: Hiren Dasani
Lead manager Hiren Dasani is a seasoned investor with 23 years of experience and has been at the helm of this strategy since May 2017. His tenure at Goldman Sachs dates back to 2007, where he previously led equity research for four years. Dasani is supported by Aman Batra, head of equity research for India, and a team of four analysts who provide stability and deep analytical insights. The team’s approach focuses on identifying fundamentally sound companies trading at reasonable discounts to their intrinsic value, with a significant portion of the portfolio allocated to small- and mid-cap stocks.
The fund’s bottom-up research process has consistently identified undervalued opportunities, particularly in the small- and mid-cap segments, which account for 40 to 50 percent of the portfolio. This focus has resulted in substantial alpha generation over the years. The strategy’s track record under Dasani is noteworthy, outperforming over 85 percent of its category peers over the 5- and 10-year periods ending June 30, 2024.
The first half of 2024 has demonstrated European investors› diverse interests and adaptability in a dynamic global environment. Money market and bond funds continue to attract substantial inflows, while equity strategies, particularly those focused on India, are gaining momentum. The Goldman Sachs India Equity Fund stands out as a prime example of a strategy that has successfully captured investor interest, backed by strong management and a proven investment approach. These trends and strategies will likely continue to shape the investment landscape in the coming months.
Jeffrey Schumacher is director manager research at Morningstar Benelux. Morningstar analyses and evaluates investment funds based on quantitative and qualitative research. Morningstar is an Investment Officer knowledge partners and takes an analytical look at a specific category of investment funds every Friday.