We are pleased to introduce you to Lipper’s first global fund market report, which provides a big-picture view of the mutual funds industry. The report gives us flows, size, and market-share data for US$26.6 trillion of investments; it slices and dices by asset type, domicile, promoter, and Lipper’s Global Classifications. The data are presented for a number of different periods—from the latest month back to five years ago—so it is easy to spot the significant trends or changes. Here is an excerpt showing the highest level of aggregated assets under management:

Table 1. Mutual Fund Industry Aggregated Assets Under Management (US$Bil)

Source: Lipper

August 2013 Commentary

The message from the latest month’s data is clear: Investors moved their money out of bonds and into safe-haven money market funds. Estimated net flows by asset type reveal a US$42-billion net shift from bond funds to money market funds through the month, with other asset types attracting less significant yet steady inflows to conclude a healthy net-positive month for the mutual funds industry.

Table 2. Asset Type Net Flows, August 2013

Source: Lipper

Most of the shift was from bond funds specifically denominated in U.S. dollars, with that revenue switching into money market USD funds and money market EUR funds. U.S.-domiciled and France-domiciled money market funds attracted over US$20 billion net each. In the case of money market EUR funds, it was the first time that net flows had been significantly positive since early 2012. However, readers should be wary that historical flows into money market funds have tended to be extremely volatile rather than a predictor of any long-term trend; they often represent an instantaneous reaction to recent events. One could easily speculate that these data are merely reflective of Chairman of the Federal Reserve Ben Bernanke’s warnings in June of putting the brakes on the generous U.S. monetary policies currently stimulating economic growth. It will be interesting to see in Lipper’s future reporting if the flows scenario reverses as quickly as the Federal Reserve’s noises have already caused recently.

Money market funds aside, it is clear from our report that investors have seen most things European as having pretty good value lately. For example, we have seen US$97.0 billion of net flows into euro-based funds this past year and US$24.5 billion for August alone–far ahead of flows for funds based on other currencies. The Equity Europe fund sector has grown quickly and steadily in the last year, increasing its market share and attracting US$15 billion of net inflows.

Five-Year Commentary

The five top domiciles over the five-year period were the U.S., the U.K., Brazil, Ireland, and China, which all increased their global fund market share at the expense of France, Italy, Germany, Spain, and Luxembourg.

Table 3. Global Fund Domiciles, Market Share–5 Top Markets (%)

Source: Lipper

The change in market share over the same five-year period, including more fund domiciles, was:

Table 4. Global Fund Domiciles, Market Share Changes—Top Markets (%)

Source: Lipper

Lipper Global Classifications

The Lipper Global Classification system covers no less than 450 different sectors. August 2013’s global statistics report shows the best and worst selling strategies over a number of periods. Perhaps the most interesting is the longer-term picture, which shows the phenomenal sales success of the USD bond sectors, which attracted the largest revenues at the expense of the money market sectors and the formerly attractive equity strategies. The following table shows the performance of all of these strategies over the period and provides us an explanation for some of the sales figures. Investors have certainly hunted down yield, and indeed they have found it and killed it, but the mistrust and abandonment of humble U.S. equity funds in this period does not look so well justified.

The fact is that Lipper’s Equity US index has performed equally well over the last five-year period as it did in the five years before (approximately 33% cumulative returns). But the hammer blow of the maximum drawdown of 51.4% in just the 16 months ended February 2009 left investors a psychological scar that will never really heal. The first cut is the deepest. Investors would rather seek the safer, yet duller alternative investments than return to their first star-spangled love.

Table 5. Lipper Global Classifications’ Net Flows and Lipper Indices’ Total Returns

Source: Lipper