Since the outflows of €100.3 bn for the year 2023 marked the highest outflows from mixed-assets funds on record, it is worthwhile to analyze the underlying trends in this segment of the European fund industry, as we may see a new era for mixed-assets funds.
Since ETFs play only a very minor role in the segment of mixed-assets funds, we won’t analyze the flows by product type.
Graph 1: Estimated Annual Net Flows in Mixed-Assets Funds (Euro Billions)
Source: Refinitiv Lipper
Mixed-assets funds have been in the focus of European investors since after the credit crisis in 2008. This was because some mixed-assets products were able to post positive returns during the market turmoil of the credit crisis, as well as during the euro crisis in 2011. With the falling interest rates, an increasing number of investors started to look at mixed-assets as replacements for their bond investments since the risk/return profile of some—especially conservative mixed-assets funds—is somewhat similar to the risk/return profile of aggregate bond funds. With the increasing interest rates over the course of 2022 and at the same time falling equity markets, the majority of mixed-assets funds posted negative returns for the year. As a result, some investors were disappointed with the results of the mixed-assets funds in their portfolio and sold them.
With increasing hope that central banks around the globe have reached the end of their interest rate hiking cycles, investors began to reconsider bonds as an attractive asset type and started to buy back into bonds. Given the level of interest rates achieved, the attractiveness of (conservative) mixed-assets funds has declined sharply, leading to further sales.
With regard to this, it is not surprising that mixed-assets funds witnessed outflows in all months of 2023.
Graph 2: Estimated Monthly Net Flows in Mixed-Assets Funds (Euro Billions)
Source: Refinitiv Lipper
The changing market environment for bonds and the current fund flows trend may indicate that mixed-assets may face a longer period with outflows.
Mixed-Assets Funds by Lipper Global Classification
Since mixed-assets funds follow a variety of different investment objectives, Lipper classifies these funds in 71 different Lipper Global Classifications and five product types (absolute return, guaranteed, (plain vanilla) mixed-assets, protected, and target maturity funds).
In line with expectations, (plain vanilla) mixed-assets funds are the most important product type and account for the majority of the outflows (-€86.0 bn) from mixed-assets funds over the course of 2023. It was followed by absolute return products (-€12.8 bn), target maturity products (-€1.0 bn), and protected products (-€0.7 bn). Guaranteed funds were the only product type in the mixed-assets segment which posted inflows (+€0.3 bn) over the course of 2023.
Graph 3: Estimated Net Flows in Mixed-Assets Funds by Product Type – January 1 – December 31, 2023 (Euro Billions)
Source: Refinitiv Lipper
It is not surprising that guaranteed mixed-assets funds enjoyed inflows over the course of 2023 since guaranteed products are mainly retail products which are used by advisors as a one-stop product if their customers are looking for products with a conservative or moderate risk profile. This is especially true when the respective fund promoter of such products is linked to a captive distribution channel.
Mixed-Assets Funds by Lipper Global Classification
Contrary to the general fund flow trend, Mixed Asset GBP Aggressive (+€18.7 bn), Mixed Asset USD Balanced – US (+€5.2 bn), Mixed Asset CHF Balanced (+€1.5 bn), Mixed Asset CHF Aggressive (+€1.2 bn), and Mixed Asset EUR Aggressive – Global (+€0.7 bn) enjoyed inflows. At the other end of the spectrum, Mixed Asset EUR Conservative – Global (-€27.8 bn) suffered the highest net outflows in the mixed-assets segment, bettered by Mixed Asset EUR Flexible – Global (-€24.4 bn), Mixed Asset EUR Balanced – Global (-€19.7 bn), Mixed Asset GBP Balanced (-€17.7 bn), and Mixed Asset USD Flexible – Global (-€3.6 bn).
Graph 4: Estimated Net Flows in Most Important Mixed-Assets Classification – January 1 – December 31, 2023 (Euro Billions)
Source: Refinitiv Lipper
The strong inflows in Mixed Asset GBP Aggressive are somewhat surprising, given the overall fund flow trend in mixed-assets funds. That said, it looks like UK investors has shifted money from Mixed Asset GBP Balanced into Mixed Asset GBP Aggressive. Unfortunately, such an assumption can’t be proven definitvely by fund flows data, but since some institutional investors—especially in the pensions segment—may have had a higher free risk budget when the UK bond market normalized after the LDI crisis in Q4 2022, this assumption seems to be reasonable. With regard to this, one may conclude that these flows are rather driven by a specific market event than the overall market environment and fund flow trends.
Mixed-Assets Funds by Promoter
According to the Lipper database there were 277 fund promoters in which witnessed inflows of more than €10,000 over the course of 2023, while 554 fund promoters faced outflows over the same time period. With regard to the overall fund flow trend, it is not surprising that the majority of promoters who offer mixed-assets funds faced outflows over the course of 2023.
In more detail, BlackRock, the largest asset manager in Europe, enjoyed the highest inflows in mixed-assets funds (+€8.1 bn), followed by St. James Place (+€5.2 bn), True Potential (+€3.8 bn), BNP Paribas AM Funds (+€3.5 bn), and SPW (+€2.4 bn).
These numbers may somewhat confirm the assumptions made before with regard to the usage of mixed-assets products by financial advisors and subadvised pension products. Nevertheless, all assumptions made based on the overall fund flow numbers can’t be verified by data, as it is not disclosed which investor buys or sells a respective product.
Graph 5: The 20 Best-Selling Promoter of Mixed Asset Funds in Europe – January 1 – December 31, 2023 (Euro Billions)
Source: Refinitiv Lipper
