by Jake Moeller.
Lipper’s Jake Moeller presents highlights of the European Fund Market Report for 2014. The full version of the report is available here.
In 2013 investors and fund managers alike became preoccupied with an environment where interest rate rises were likely imminent. A year on and monetary tightening that was expected on the back of the tapering expectations of the U.S. quantitative-easing programme failed to materialise. In early 2014 many bond fund managers were busy reducing their duration in expectation of the rate rises and were subsequently hit by the “pain trade” of anticipating these increases too early as yields fell further. A high-yield “wobble” on the back of comments made by U.S. Federal Reserve Chairperson Janet Yellen in August also spooked the markets as political events in Europe—Greece and Russian involvement in the Ukraine—began to make a material return to investors’ concerns.
Table 1. European Net Sales in 2014 (€M)
Even allowing for some outflows in equities late in the summer, a total of €367bn in European estimated net sales for 2014 represented an increase of 95% from 2013 and fell just shy of the best ever total of €372bn taken in 2006. Cross-border fund flows were strong, with some €179bn net being collected for the year (not including the net flows of money market funds). Country wise, Italy—with a total of €47bn for the year—dominated the European flows. Spain, which came in second for most of the year, was finally pipped to the post by Germany in a very close result (+€20.3bn and +€20.9bn, respectively), and the United Kingdom came in sixth with €13bn of net flows; an anaemic last quarter pushed the U.K. down in the rankings.
Table 2. European Assets and Number of Funds in December 2014 (€m)
Despite the constant threat of increasing interest rates, bond funds had their seventh consecutive year of growth, with a total of €164bn of estimated net sales for 2014; they were dominant over equities, which could only muster €60bn by comparison. The success of mixed-asset funds was a continuing theme throughout Europe, with €125bn net being collected during the year. However, the number of new mixed-asset fund launches was down for the first time since 2010, suggesting the trend may now possibly have hit its peak. Commodity funds remained a loser in a difficult macro environment, with some €2.2bn of net outflows during the year.
Table 3 Top 25 Sectors in Europe (€M)
On a sector basis there was still a strong income & yield theme, which was reflected in net flows. Broad-based European corporate bond funds proved very popular, collecting some €58bn across various iterations. This was also interspersed with preferences for larger-cap “safe-haven” equities in the U.S. and Europe. The mixed-asset trend, which includes flows into fund-of-funds portfolios of varying risk, also reflected Europe’s preference for broad-based diversification in an increasingly fraught geopolitical environment. Higher-risk equities and emerging market regions (other than EM bonds) were barely represented in the 25 top sectors.
Table 4. Top European Master Groups by Sales in 2014 (€M)
The top groups by sales contained a number of regulars. BlackRock, with €29bn of estimated net sales for 2014, easily headed up the table. There were a number of groups around the €16bn ENS mark for 2014, but JPM—with the lowest number of funds of this total (just over 200 funds) had the best concentration average.