Amid market sluggishness, lingering concerns over the COVID-19 pandemic and geopolitical tensions in Europe, the continent’s fund industry saw net outflows in February, with mutual funds seeing outflows of €91.9 billion YTD, while ETFs saw inflows of €34.7 billion, CNBC writes.

Mutual funds – pools of investors allocated by asset managers into stocks, bonds, money market instruments and other securities – have seen outflows of €67.6 billion. Meanwhile, exchange-traded funds (ETFs) – bundles of securities that trade on conventional stock exchanges – saw inflows of €9.2 billion.

“In this market environment and given the economic uncertainty, one would expect European investors to sell long-term funds and buy money market products,” according to Detlef Glow, head of Lipper EMEA research at Refinitiv.

He was even surprised that European investors were selling money market products, which are usually considered safe haven investments.

The overall flow figures were heavily impacted by outflows of €49.4 from money market products – short-term debt investments – which meant long-term funds actually saw outflows of around €9bn. These money market products are low-risk cash funds and typically offer investors high liquidity.

European investors’ concerns over rising interest rate driven inflation around the world appear to be behind the outflows, as they continued to sell bond products in February.

In the first 2 months of this year, €91.9 billion flowed out of mutual funds, while ETFs saw inflows of €34.7 billion. Overall, this is very similar to the trend experienced during difficult periods for the market – the global financial crisis of 2008 or the euro sovereign debt crisis in 2011.

That said, it is noticeable that European investors are still in “risk mode” despite the difficult market environment, taking positions in sectors that can offer diversification for their portfolio, such as global equities or flexible mixed-asset products.