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December 15, 2014

Monday Morning Memo: European investors—in a risk-off mode—sold equity funds in October

by Detlef Glow.

European fund flows saw a massive slowdown in October 2014, after strong inflows into mutual funds for the first eight months of the year. This slowdown in October was driven by large net outflows (-€9.3 bn) from equity funds and from “other” funds (-€1.9 bn).

REUTERS/Mark Blinch

REUTERS/Mark Blinch

But even with these outflows, the European mutual fund industry still posted overall net inflows of €0.4 bn into long-term mutual funds for October. Mixed-asset products (+€7.7 bn) continued to outpace bond funds (+€4.4 bn) in terms of inflows. The only other long-term asset class with net inflows was alternative/hedge products (+€0.2 bn), while property funds (-€0.3 bn) and commodity funds (-€0.3 bn) suffered net outflows.

Money Market Products

Opposite to long-term products, money market products enjoyed massive inflows for October, with money market funds posting inflows of €27.4 bn and enhanced money market funds enjoying net inflows of €1.1 bn.

For October money market EUR (+€21.0 bn) followed by money market GBP (+€6.3 bn) saw—opposite to the previous month—by far the highest net inflows of all the fund categories covered in the FundFile database. On the other hand, money market NOK (-€.3 bn) faced the highest net outflows in the money market segment for October. These flows showed once again how active European investors use money market products in their asset allocation.

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

14-12-15 Flows by Asset Type

Source: Lipper FundFile

Fund Flows by Sectors

Opposite to the overall net flows, equities North America (+€4.4 bn) was the best selling sector with regard to long-term funds, followed by asset allocation products (+€3.8 bn) and bond EUR funds (+€3.5 bn) as well as bonds EUR corporate investment-grade debt funds (+€3.1 bn) and bonds global currencies funds (+€2.0 bn). At the other end of the spectrum equities Europe funds suffered net outflows (-€4.1 bn), bettered somewhat by equities global (-€3.3 bn) as well as equities Europe mid-/small-caps (-€2.8 bn), equities emerging markets (-€2.3 bn), and bonds specialty (-€2.2 bn) funds.

Fund Flows by Markets

Single fund market flows for long-term funds showed a mixed but positive picture for October; 22 of the 33 markets covered in this report showed net inflows. The single market with the highest net inflows for October was Germany (+€2.4 bn), followed by Italy (+€1.9 bn) and Belgium (+€0.8 bn). Meanwhile, the international fund hubs Luxembourg and Ireland (-€5.8 bn), France (-€1.5 bn), and Denmark (-€0.5 bn) stood on the other side.

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

 14-12-15 Market Flows

Source: Lipper FundFile

Within the equity sector, funds domiciled in Switzerland (+€0.9 bn), followed by the United Kingdom (+€0.2 bn), the Netherlands (+€0.2 bn), Finland (+€0.2 bn), and the Czech Republic (+€0.005 bn) showed net inflows, while equity funds domiciled in the international fund hubs (-€6.6 bn), France (-€1.1 bn), and Sweden (-€1.0 bn) stood at the other end of the table.

The net inflows into bond funds were driven by funds domiciled in Germany (+€2.0 bn), followed by funds domiciled in Italy (+€1.3 bn), Sweden (+€1.0 bn), and Spain (+€1.0 bn) as well as Belgium (+€0.8 bn). On the other side the international fund hubs (-€1.5 bn) were the domiciles with the highest net outflows from bond funds, bettered somewhat by funds domiciled in the United Kingdom (-€1.1 bn) and Switzerland (-€0.7 bn).

With regard to mixed-asset products the flows were driven by net inflows into funds domiciled in the international fund hubs (+€2.8 bn), followed by Germany (+€1.5 bn), the United Kingdom (+€1.0 bn), Spain (+€0.9 bn), and Italy (+€0.5 bn). Overall, 11 of the 33 countries showed net outflows from mixed-asset products; Portugal at minus €40 m—bettered somewhat by Poland (-€9 m) and Austria (-€5 m)—was at the other end of the table.

Fund Flows by Promoters

BlackRock, with net sales of €3.9 bn, was the best selling group of long-term funds for October, ahead of Vanguard (+€2.2 bn) and Pioneer (+€1.6 bn).

Graph 3: Ten Best Selling Groups, October 2014 (Euro Millions)

 14-12-15 Top 10 Groups

Source: Lipper FundFile

On a single-asset basis BlackRock (+€2.8 bn) was the best selling promoter of bond funds for September, followed by KBC (+€2.1 bn) and DeAWM (+€1.5 bn). Within the equity space Vanguard (+€1.9 bn) stood at the top of the table, followed by BlackRock (+€0.8 bn) and Covéa Finance (+€0.6 bn). Allianz Global Investors (+€1.0 bn) was the best selling promoter for mixed-asset products in Europe, followed by BlackRock (+€0.6 bn) and JP Morgan (+€0.5 bn).

It is remarkable that in October only two of the ten best selling equity funds in Europe were actively managed products, while the other eight were index trackers or exchange-traded funds (ETFs).

Table 2: Ten Best Selling Equity Funds, October 2014 (Euro Millions)

14-12-15 Top Ten Funds by Flows

Source: Lipper FundFile

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