Key Takeaways
- Inflation-linked bond funds notched a second consecutive quarter of inflows as investors sought a hedge against rising prices.
- The SpaceX IPO and strong corporate earnings reignited demand for US tech and AI funds.
- Thematic, infrastructure, and real asset funds also staged a comeback as investors looked for further inflation hedges.
Asset class capital flows in Q2 2026 showed fixed-income assets drawing in investors that had been spooked by political uncertainty and conflict in the Middle East, and what that could mean for global inflation amid spikes in oil prices.
European open-end funds and exchange-traded funds, excluding money market funds, gathered EUR 188 billion in the second quarter of 2026, down from EUR 203 billion in the first quarter, as escalating tensions in the Middle East weighed on investor risk appetite.
Fixed-income funds displaced equity as the leading asset class in the second quarter, gathering EUR 84.1 billion versus EUR 75.7 billion in the first quarter, while equity inflows eased to EUR 72.4 billion. Looking deeper into fixed income markets, investors weary of rising global costs turned to inflation-linked bond funds, allowing the category to notch two quarters of back-to-back inflows after being out of favor for the prior three years.
Global emerging-market bond funds that have higher yields than many developed sovereigns funds grew more attractive to investors seeking to take advantage of higher coupons. This was particularly the case for energy exporters benefiting from rising oil prices that were also geographically shielded from supply-chain bottlenecks in the Strait of Hormuz—such as Nigeria.
Asian bond funds were the exception, with currency depreciation in several leading markets causing investors to rather send their capital elsewhere. UK political turmoil continued to weigh on GBP corporate bond funds as well, extending a nearly three-year period of outflows to a cumulative EUR 24 billion.
Flows for Inflation-Linked Bond Categories
The AI Trade Drives Equity Investors Back to the US
Tracing regional flows showed that equity investors largely returned to the US, after diversifying away from the world’s largest economy in the first quarter as they feared an AI bubble and overvalued mega-cap stocks. However, strong corporate earnings and the SpaceX SPX IPO managed to lure them back to US and Global markets in the second quarter—where the US still often accounts for a large stake in benchmarks.
Global and US large-cap blend equity categories gathered EUR 88.2 billion combined, more than double their first-quarter total. On the other hand, Europe large-cap growth equity suffered losses due to rising input costs for local companies, anticipation of higher energy inflation, and a resulting 25 basis point interest rate hike from the European Central Bank in June.
Thematic Funds Turn Net Positive as Tech Posts Its Best Quarter on Record
When it came to sector-specific funds, equity investors were drawn to technology-focused funds, but also flirted with infrastructure funds as an extension of that trade, as large data-center builds and the energy infrastructure around them offered opportunities.
The effect on thematic funds overall was a net positive inflow for the quarter, following several quarters where thematic funds struggled to gain traction as US policymakers reduced their focus on ESG and sustainability.
Space-themed funds extended a seventh consecutive quarter of inflows, more than doubling to EUR 1.3 billion, as the SpaceX listing in June sharpened investor appetite and drew several new entrants from issuers including Global X, VanEck, and WisdomTree.
Thematic Open-Ended Fund and ETF Flows by Broad Theme
Real Assets Signal a Recovery
Real assets gained favor too, as investors sought physical hard assets as natural inflation hedges. Second-quarter flows into real assets funds amounted to EUR 3.7 billion, almost fully reversing the combined EUR 4.1 billion of outflows in the two preceding quarters.
Investors particularly sought out oil and gas as supplies came under strain, increasing prices and therefore investor interest. Struggles around storing these assets did little to dampen interest.
Active Equity Funds Lose More Ground to Passive Options
Investors pushing money into equities mainly did so via passive alternatives—continuing the long-term trend of favoring passives, both ETFs and index-tracking funds, for equity investing and active management for fixed income. As a result, fund providers with solid passive offerings were rewarded with another quarter of substantial flows.
BlackRock topped the asset managers’ flows table in the second quarter with EUR 36.4 billion, chiefly via its iShares range. Several funds in their range were quick to include the blockbuster SpaceX stock just a few days after its June 12 initial public offering, luring in investors seeking a piece of the action but who may have missed out on the initial oversubscribed IPO. The platform sought to further capitalize on the excitement with the launch of the iShares Space Technologies UCITS ETF. Barring Pimco and Natixis, every asset manager in the top-ten list of gatherers this quarter had a strong passive offering.
