Funds investing in U.S. equities enjoyed healthy inflows over the course of the last few years. Does that mean that European investors have overweighted U.S. equities in their portfolios, or did they just catch up with the weighting of U.S. equities in the prominent global equity indices?
With regard to the estimated fund flows it needs to be said that equity global was the best-selling equities classification over the course of the last few years. The high inflows into funds classified as equity global are not surprising since equity global is the largest Lipper global classification in Europe by assets under management.
To evaluate if U.S. equities are on the rise, we separated all equity classifications from the Lipper global classification scheme and split them into three different groups:
- Equity funds which invest globally. This group contains mutual funds and ETFs classified as Equity Global, Equity Global Small and Mid-Cap, and Equity Global Income, as well as sector and themed products without any regional restrictions.
- Mutual funds and ETFs which invest in U.S. equities (Equity U.S., Equity U.S. Small and Mid-Cap, and Equity U.S. Income).
- All other equity funds and ETFs—this group contains all funds with regional restrictions which are not covered under number 1 or 2.
The graph below shows that the market share of mutual funds and ETFs investing in U.S. equities has increased from 13.49% to 16.82% between December 31, 2019, and April 30, 2024. These numbers indicate that the market share of U.S. equities within the portfolios of European investors might still be far below the weighting of U.S equities in the most prominent global equity indices. When we also separate all mutual funds and ETFs investing in equity global from the calculation, the market share of U.S. equities increases from 20.71% to 31.04% over the observation period. Obviously the increasing market share is not only driven by the estimated net sales since the performance of the underlying equities also play an important role when evaluating the trends in assets under management.
Graph 1: Market Share of Assets Under Management in Equity Funds Registered for Sales in Europe
Source: LSEG Lipper
Even more interestingly, the chart below depicts that the market share in assets under management for mutual funds and ETFs investing globally increased much more than the respective market share for mutual funds and ETFs investing in U.S. equities. This may mean that European investors prefer to invest in global equity portfolios instead of using mutual funds or ETFs with a regional or country-based investment focus.
To answer the question from the top, it can be concluded that U.S. equities are on the rise. That said, a large portion of the growth might be caused by the relative outperformance of U.S. equities compared to other markets. The numbers also suggest that European investors do not appear to overweight U.S. equities.
This article is for information purposes only and does not constitute any investment advice.
The views expressed are the views of the author, not necessarily those of Lipper or LSEG.
