UCITS funds saw net inflows rise to €30 billion ($42.3 billion) in the first quarter of 2011, up from €26 billion in the fourth quarter of 2010, according to the latest quarterly statistical release from the European Fund and Asset Management Association, which describes trends in the European investment fund industry.

However, the release also says net inflows in long-term UCITS funds - those that exclude money market funds - fell from €67 billion in the last quarter of 2010 to €39 billion.

EFAMA says much of the drop in inflows for long-term UCITS funds can be explained by a sharp reduction in net inflows to equity funds, while net inflows into bond and balanced funds increased during the quarter. Investors were cautious, says the report, because of political unrest in North Africa and the Middle East, the earthquake in Japan, and tensions in the sovereign debt markets.

Money market funds saw net outflows of €9 billion, an improvement on net outflows of €41 billion in the previous quarter and €30 billion in the first quarter of 2010. EFAMA says net assets of money market funds have returned to pre-crisis levels, signalling a possible end to the readjustment of investors’ portfolios against the background of a pick-up in short term interest rates.

Total net assets of UCITS funds decreased by 0.9 per cent in the first quarter to €5,949 billion, according to the report. Net assets of money market funds fell furthest, by 2.6 per cent during the quarter, followed by a 1.5 per cent drop in equity funds and a 0.4 per cent fall in bond funds. Bucking the trend, balanced funds increased in net assets by 1.3 per cent.

In contrast, total net assets of non-UCITS funds increased by 1.2 per cent in the first quarter to reach €2,162 billion at the end of the quarter. EFAMA says much of the increase is due to special funds reserved to institutional investors, which saw net inflows of €28 billion during the quarter.

The combined assets of UCITS and non-UCITS funds decreased by 0.4 per cent to €8,111 billion at the end of the quarter. UCITS assets accounted for 73 per cent of the total investment fund market in Europe, with non-UCITS accounting for the remaining 27 per cent, says EFAMA.