European Investors sell-off Mutual Funds in November 2018

After unexpectedly high outflows in October, European investors pulled further away from long-term mutual funds in November as the market environment and general sentiment remained negative. As a consequence, November was the seventh month in a row posting net outflows from long-term mutual funds after 16 consecutive months showing net inflows. Real estate funds (+€0.6 bn) was the only asset type with net inflows for November, while all the other asset types in the segment of long-term mutual funds witnessed net outflows: bond funds (-€21.4 bn), alternative UCITS funds (-€11.1 bn), mixed asset funds (-€5.3 bn), equity funds (-€3.4 bn), and ”other” funds (-€1.7 bn), as well as commodity funds (-€0.3 bn).

These fund flows added up to overall net outflows of €42.6 bn from long-term investment funds for November. ETFs contributed inflows of €3.8 bn to these flows.

Money Market Products

After a month with high inflows, European investors also sold some of their positions in money market products. As a result, money market funds witnessed net outflows of €12.7 bn for November. Opposite to their actively managed peers, ETFs investing in money market instruments contributed net inflows of €0.1 bn to these flows.

This flow pattern led the overall fund flows to mutual funds in Europe to overall net outflows of €42.6 bn for November and to estimated net outflows of €74.0 bn for the year 2018 so far.

Money Market Products by Sector

Money Market SEK (+€0.3 bn), Money Market Other (+€0.1 bn), Money Market NOK (+€0.1 bn), Money Market Global (+€0.1 bn), and Money Market CZK (+€0.1 bn) were the five best-selling sectors overall for November. At the other end of the spectrum, Money Market GBP (-€8.4 bn) suffered the highest net outflows overall, bettered by Money Market EUR (-€5.8 bn) and Money Market CHF (-€0.4 bn). Comparing this flow pattern with the flow pattern for October showed that European investors reduced their positions in the euro and the British pound sterling which were built in October. These shifts might have been caused by asset allocation decisions, as well as for other reasons such as cash dividends or cash payments, since money market funds are also used by corporations as replacements for cash accounts.

Graph 1: Estimated Net Sales by Asset Type, November 2018 (Euro Billions)

Source:  Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds, Equity Global (+€6.5 bn) was the best-selling sector, followed by Bond USD Medium Term (+€5.9 bn). Equity US (+€2.3 bn) was the third best-selling sector, followed by Equity UK (+€0.6 bn) and Equity China (+€0.5 bn).

Graph 2: Ten Top Sectors, November 2018 (Euro Billions)

Source:  Lipper

At the other end of the spectrum Bond Global (-€3.2 bn) suffered the highest net outflows from long-term mutual funds, bettered by Bond EUR Short Term (-€3.0 bn) and Equity Europe Small and Mid Cap (-€2.8 bn) as well as Bond Global USD Hedged (-€2.7 bn) and Mixed Asset EUR Flexible Global (-€2.5 bn).

Graph 3: Ten Bottom Sectors, November 2018 (Euro Billions)

Source:  Lipper

Fund Flows by Markets (Fund Domiciles)

Single fund domicile flows (including those to money market products) showed, in general, a negative picture for November, with only 5 of the 34 markets covered in this report showing net inflows and 29 showing net outflows. Sweden (+€0.2 bn) was the fund domicile with the highest net inflows, followed by Jersey (+€0.1 bn), Germany (+€0.1 bn), the Czech Republic (+€0.1 bn) and Gibraltar (+€0.0 bn). On the other side of the table was Luxembourg (-€29.3 bn), the fund domicile with the highest outflows, which was bettered by France (-€8.6 bn) and the United Kingdom (-€5.5 bn).

Graph 4: Estimated Net Sales by Fund Domiciles, November 2018 (Euro Billions)

Source:  Lipper

Within the bond sector, funds domiciled in the Netherlands (+€0.1 bn) led the table for November, followed by those domiciled in Sweden (+€0.1 bn) and Poland (+€0.003 bn). Bond funds domiciled in Luxembourg (-€8.8 bn), Ireland (-€4.6 bn) and France (-€2.5 bn) stood at the other end of the table.

For equity funds, products domiciled in Ireland (+€3.3 bn) led the table for November, followed by funds domiciled in Belgium (+€1.1 bn), Denmark (+€0.2 bn), Austria (+€0.04 bn) and Portugal (+€0.04 bn). Meanwhile, Luxembourg (-€4.6 bn), the United Kingdom (-€2.3 bn) and France (-€0.2 bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed asset products, Switzerland (+€0.1 bn) was the domicile with the highest net inflows, followed by funds domiciled in Germany (+€0.1 bn), Denmark (+€0.1 bn), Austria (+€0.1 bn) and Jersey (+€0.03 bn). In contrast, Luxembourg (-€2.6 bn), France (-€1.1 bn) and Belgium (-€0.8 bn) were the domiciles with the highest net outflows from mixed asset funds.

Denmark (+€0.1 bn) was the domicile with the highest net inflows into alternative UCITS funds for November, followed by Belgium (+€0.04 bn), Sweden (+€0.02 bn), Liechtenstein (+€0.01 bn) and Finland (+€0.01 bn). Luxembourg (-€5.1 bn), bettered by Ireland (-€2.9 bn) and the United Kingdom (-€1.6 bn), stood at the other end of the table.

Fund Flows by Promoters

State Street, with net sales of €3.1 bn, was the best-selling fund promoter for November overall, ahead of Aviva (+€2.6 bn) and BlackRock (+€2.1 bn). It is noteworthy that the flows for State Street and BlackRock were driven by money market funds.

Table 1: Ten Best Selling Promoters, November 2018 (Euro Billions)

Source:  Lipper

Considering the single asset classes, UBS (+€4.3 bn) was the best-selling promoter of bond funds, followed by Vanguard Group (+€0.5 bn), State Street (+€0.4 bn), BFund Partner Solutions (+€0.2 bn) and Royal London (+€0.2 bn).

Within the equity space, Aviva (+€4.2 bn) stood at the head of the table, followed by BlackRock (+€1.4 bn), Access (+€1.4 bn), KBC (+€1.1 bn) and Societe Generale (+€0.8 bn).

Allianz (+€0.5 bn) was once again the leading promoter of mixed asset funds in Europe, followed by Union Investment (+€0.3 bn), MFS Investment Management (+€0.2 bn), FvS Flossbach von Storch (+€0.2 bn) and La Caixa (+€0.1 bn).

H2O Asset Management (+€0.6 bn) was once again the leading promoter of alternative UCITS funds for the month, followed by Ruffer (+€0.2 bn), Blackstone (+€0.2 bn), Deutsche Bank (+€0.1 bn) and Legal & General (+€0.1 bn).

Best Selling Funds

The ten best-selling long-term funds gathered at the share-class level total net inflows of €15.7 bn for November. Since only real estate funds enjoyed net inflows for the month, it was surprising that the sales table for the ten top single funds for November was dominated by bond funds (+€8.1 bn), the asset type with the highest outflows overall.

Table 2: Ten Best Selling Long-Term Funds, November 2018 (Euro Millions)

Source:  Lipper