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September 15, 2014

Monday Morning Memo: European investors try to chase alpha with asset allocation products

by Detlef Glow.

The year 2014 continued to be a very successful one for the European mutual fund industry, with long-term mutual funds enjoying another €41.0 bn of net inflows for July. Once again, the majority of these flows were gathered by bond funds (+€18.6 bn), followed by mixed-asset products (+€13.0 bn) and equity funds (+€11.8 bn) as well as commodity funds (+€0.1 bn). On the other hand, alternative/hedge funds (-€0.4 bn), property funds (-€0.5 bn), and funds from the “other” peer group (-€1.1 bn) suffered net outflows for the month.

REUTERS/Sean Yong

REUTERS/Sean Yong

Money Market Products

Along with long-term mutual funds, money market products enjoyed net inflows for July, with money market funds gathering €10.8 bn while enhanced money market funds gathered €0.2 bn. These inflows drove the overall flows for July up to €52.5 bn.

While money market EUR, in contrast to June, saw the highest net inflows (+€14.5 bn) of all the fund categories covered in the FundFile database for July, money market USD suffered the highest net outflows (-€7.4 bn) of all fund categories. This showed once again how active European investors use money market products in their asset allocation.

Graph 1: Estimated Net Sales, July 2014 (Euro Millions)

14-09-15 Flows by Asset Type

Source: Lipper FundFile

Fund Flows by Sectors

With regard to long-term funds, asset allocation products (+€6.6 bn) were once again the best selling asset class, followed by bonds EUR (+€4.1 bn) and mixed-asset balanced (+€3.1 bn) as well as equities Pacific ex Japan (+€3.0 bn) and bonds global currencies (+€2.9 bn). At the other end of the spectrum bonds USD corporate high yield suffered net outflows (-€5.0 bn), bettered by guaranteed funds (-€1.0 bn) as well as equities Europe (-€0.9 bn), bonds global high yield (-€0.8 bn), and convertible bonds and options (-€0.7 bn).

Fund Flows by Markets

The fund market inflows for long-term funds were dominated by funds domiciled in the international cross-border hubs (+€22.1 bn), followed by funds domiciled in Italy (+€5.3 bn), Spain (+€2.7 bn), and Switzerland (+€2.5 bn). Meanwhile, France (-€0.9 bn), Portugal (-€0.1 bn), and Greece (-€0.05 bn) stood on the other side.

Graph 2: Estimated Net Sales by Country, July 2014 (Euro Millions)

14-09-15 Flows by Market

Source: Lipper FundFile

The inflows into equity funds were also dominated by international cross-border funds (+€9.6 bn), followed by funds domiciled in the United Kingdom (+€1.3 bn), Denmark (+€0.6 bn), Spain (+€0.5 bn), and Switzerland (+€0.5 bn). Funds domiciled in France (-€1.1 bn), Germany (-€0.4 bn), and Poland (-€0.1 bn) stood at the other end of the table.

Within the bond sector funds domiciled in the international cross-border hubs (+€7.1 bn) dominated the scene, followed by funds domiciled in Italy (+€2.4 bn), Switzerland (+€2.0 bn), and Germany (+€1.5 bn) as well as Spain (+€1.4 bn). On the other side Portugal (-€0.1 bn) was the domicile with the highest net outflows from bond funds, bettered somewhat by funds domiciled in Greece (-€0.03 bn) and Russia (-€0.02 bn).

The international cross-border hubs (+€6.0 bn) also dominated the mixed-asset sector, followed by funds domiciled in Italy (+€2.6 bn), Germany (+€1.4 bn), and Spain (+€1.3 bn) as well as France (+€0.6 bn). On the other side Poland (-€0.1 bn) was the domicile with the highest net outflows from mixed-asset funds, bettered somewhat by funds domiciled in The Netherlands (-€0.02 bn) and Latvia (-€0.001 bn).

Fund Flows by Promoters

BlackRock, with net sales of €4.0 bn, was the best selling group of long-term funds for July, ahead of Deutsche Asset and Wealth Management (DeAWM) (+€3.2 bn), JP Morgan Asset Management (+€2.9 bn), UBS (+€2.7 bn), and Vanguard (+€2.0 bn).

Graph 3: Market Share of the Ten Best Selling Groups, July 2014 (%)

14-09-15 Market Share Groups

Source: Lipper FundFile

On a single-asset basis UBS (+€2.0 bn) was the best selling promoter of bond funds for July, followed by BlackRock (+€1.8 bn) and DeAWM (+€1.4 bn). Within the equity space JP Morgan Asset Management (+€1.7 bn) stood at the top of the table, followed by Vanguard (+€1.5 bn) and BlackRock (+€1.4 bn). With regard to mixed-asset/asset allocation products the Italian Intessa San Paolo Group  (+€1.2 bn) led the table, followed by JP Morgan Asset Management (+€0.9 bn) and BlackRock (+€0.7 bn).

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