(CS/CSSF) The net wealth of Luxembourg UCIs and specialised investment funds increased by 1.81 percent to 2,224.479 billion euros at the end of June in comparison to the same time last year.

The figure also marks a 12.452 billion euro (0.56 percent) increase in comparison to the previous month of 2012. The financial sector surveillance commission (CSSF) estimates that this increase is mainly due to a favourable development of financial markets.

The numbers of UCIs meanwhile decreased between June 2012 and the previous month, from 3,874 to 3,864. Some 2,449 of these are umbrella funds, including a total number of 11,989 sub funds.

Meanwhile, the CSSF attributes the gains in equity UCIs to decisions taken on a European level to stabilise the euro zone, as well as accommodating monetary policies adopted in the US. Mutual fund shares in Eastern Europe were able to record the most favourable change in the month under review.

By contrast, in June almost all equity UCI categories suffered net redemptions.

High market volatility and risk-averse investors

Mutual funds in euro-denominated bonds had to post losses in June 2012, amid uncertainties related to the ongoing sovereign debt crisis in the euro area. Markets experienced high volatility in June, mainly due to the Greek elections and more general difficulties of the financial sectors of the euro zone countries.

The decision of the EU summit in late June to use the European emergency fund to recapitalise banks and to support countries in difficulty has led to an easing of interest rates. As for bonds of corporate issuers, contrasting trends in risk premiums were found for different countries and different sectors for the period under review.

Mutual funds in US dollar-denominated bonds realised gains during the month under review. In a climate of growing risk aversion resulting in a flight to quality, investors turned to investments in US government bonds. Meanwhile, the depreciation of the USD against the Euro of -1.49 percent compensated the decline in yields in the United States.

Results only slightly positive

Mutual funds in emerging market bonds posted price gains following, in particular, a reduction in risk premiums for these bonds.

Overall, the fixed income mutual funds posted a slightly positive net capital investment. All categories of money market funds, however, recorded net disinvestments.

For the full CSSF press release in French click here.