Tentative signs of recovery in fund flows across Europe reversed sharply in February and March, according to Lipper FMI, the data providers.

The downturn came after three months of inflows, which optimists had seized on as a sign that the gloom was abating and fund managers’ fortunes were on the mend.

Fund managers, who are dependent on charging fees as a percentage of assets under management, have been hit by stock market falls and rising redemptions.

Several European banks have put all or part of their asset management businesses up for sale, hoping to use the money to rebuild their capital cushions. Credit Suisse is selling its traditional long-only fund management business – which has £50bn ($74bn) of funds under management – to the UK’s Aberdeen Asset Management for about £200m.

Santander, the Spanish bank, has hoisted a for sale sign over its asset management arm and London-listed Barclays last week agreed to sell its exchange-traded funds business to private equity group, CVC.

Lipper FMI’s latest figures show that in February a net €9.1bn was withdrawn by private investors in Europe with most markets suffering net outflows.

The notable exception was the UK, Europe’s biggest market in mutual funds with €341bn ($452bn) under management, where net sales touched €1.1bn.

Worst hit were equity funds with net outflows of €2.8bn across Europe. Even equity exchange-traded funds, the low-cost, low-risk funds that replicate stock market indices and which have enjoyed record growth in recent months, reported redemptions.

The exception was fixed-income funds, notably corporate bond funds. More than a net €3bn flowed into the sector, led by UK investors.

The strongest selling funds were managed by M&G, the investment arm of UK insurer Prudential, said Lipper.

In December, M&G, which is one of the UK’s oldest fund managers, broke its previous record for net inflows in one month, helped not only by risk-averse investors switching out of equity funds into corporate bond funds, but also by savers in search of higher income switching out of bank deposits.

M&G’s fund flows are understood to have held up well through to March. But for the rest of the industry, the tail-off continued last month in spite of the strong market rally, say industry heads, countering hopes that investor confidence might have hit the bottom and was returning.

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