Equity 18 April 2023, 12:40pm

Bond funds remain the favourite investment of Hungarians

Portfolio

Investment funds have reached another milestone, as assets under management exceeded HUF 10 trillion in March 2023. Bond funds continue to be the most popular, with fresh inflows of HUF 175 billion last month alone. And thanks to the improvement in the equity market, not only fresh inflows but also capital gains have contributed to the increase in total assets.

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New milestone: HUF 10 trillion in assets under management

According to the latest statistics of the Association of Hungarian Investment Fund and Asset Management Companies (BAMOSZ), assets under management in investment funds increased by 2.6%, or HUF 256 billion, in March, thus exceeding the HUF 10 trillion mark.

While in February the growth in wealth was almost entirely driven by fresh inflows, in March exchange rate appreciation was able to take its share of the increase.

Bond funds still dominate

As in previous months, fresh capital into bond funds accounted for the bulk of the asset growth in March, but to a lesser extent than in February. While two months ago a total of HUF 216 billion net was put into bond funds, this fell to HUF 175 billion net in March, but this is still an outstanding performance among the categories. As the assets in real estate funds have fallen slightly, the gap between bond and real estate funds has widened further, with

bond funds now holding almost double the assets of the second-placed real estate funds.

Last month, absolute return funds were able to enter the HUF 1 trillion range, but due to outflows they have now fallen out of it.

Short bond rally continues

What hasn't changed since February is the preference for short-term bonds:

more than 95% of the HUF 175 billion, HUF 167 billion, went into short-term bond funds,

while only HUF 9 billion went into long and free-maturity bond funds. The growth rate for bond funds was 6.9%, the highest among the categories.

In terms of capital inflows, closed-end funds came second with HUF 28.6 billion, but money market funds and capital-protected funds also received a few billions. All other categories saw outflows of between HUF 1bn and 5bn.

While it is too early to draw any major conclusions, the chart below clearly shows that the other categories did not catch up with bond funds in March, with bond funds still dominating quite strongly in terms of fresh inflows.

In contrast to capital inflows, bond funds are no longer the top performers in terms of return performance: in a neck-and-neck race, money market and commodity funds have so far delivered the best returns, while absolute return and bond funds have taken the 3-4th place. Equity funds have been the worst performers, but the good news is that none of the categories have suffered a negative average return until the end of March this year.