Monday Morning Memo: European Fund-Flow Trends, August 2016

August showed a positive picture for the European fund industry, since only funds from the “other” category   (-€0.6 bn) faced net outflows during the month. On the other side of the table bond funds (+€22.9 bn) were the best selling asset type of long-term funds for August, followed by mixed-asset funds (+€2.3 bn), alternative UCITS products (+€1.9 bn), equity funds (+€1.9 bn), real estate funds (+€0.2 bn), and commodity products (+€0.1 bn). These fund flows added to overall net inflows of €28.5 bn into long-term investment funds for August. Even though these flows, in combination with the money market fund flows, may lead to the assumption that European investors continued to stay cautious in August, the sector flows showed that they tended to chase yield.

Money Market Products

In conjunction with these flows, money market products (+€13.4 bn) also enjoyed healthy inflows during August.

This flow pattern drove the overall fund flows to mutual funds in Europe to net inflows of €41.9 bn for August. With these inflows the European fund industry enjoyed net inflows of €153.2 bn over the course of 2016 so far.

Money Market Products by Sector

Money Market USD (+€5.5 bn) was the overall best selling sector for August, followed by Money Market GBP (+€5.4 bn) and Money Market EUR (+€3.3 bn). At the other end of the spectrum Money Market HUF (-€0.1 bn) suffered the highest net outflows, bettered somewhat by Money Market CHF (-€0.1 bn) and Money Market NZD (-€0.01 bn). Comparing this flow pattern with the flow pattern for July showed that European investors increased their positions in the U.S. dollar and bought back into the British pound sterling.

Exhibit 1. Estimated Net Sales by Asset Type, August 2016 (Euro Billions)

Source: Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Equity Emerging Markets Global (+€4.6 bn) was the best selling sector, followed by Bond Global (+€3.5 bn), Bond Emerging Markets in Hard Currencies (+€2.9 bn), and Bond Emerging Markets in Local Currencies (+€2.2 bn) as well as Bond EUR Short Term (+€1.5 bn).

Exhibit 2. Ten Top Sectors, August 2016 (Euro Billions)

Source: Lipper

At the other end of the spectrum Equity Europe (-€1.7 bn) suffered once again the highest net outflows from long-term mutual funds, again bettered somewhat by Equity Eurozone (-€1.5 bn) and Bond EMU Government (-€1.5 bn) as well as Equity Germany (-€1.0 bn) and Equity Europe ex UK (-€1.0 bn).

Exhibit 3. Ten Bottom Sectors, August 2016 (Euro Billions)

Source: Lipper

Fund Flows by Markets

Single fund market flows (including those to money market products) showed a slightly positive picture for August, with 18 of the 34 markets covered in this report showing net inflows and 16 showing net outflows. Luxembourg (+€21.1 bn), Ireland (+€12.4 bn), France (+€5.0 bn), the United Kingdom (+€2.7 bn), and Switzerland (+€1.7 bn) were the domiciles with the highest overall net inflows, while Belgium was the single market with the highest net outflows (-€1.8 bn), bettered by the Netherlands (-€1.0 bn) and Italy (-€0.4 bn).

Exhibit 4. Estimated Net Sales by Fund Domiciles, August 2016 (Euro Billions)

Source: Lipper

Within the equity sector, funds domiciled in Ireland (+€1.5 bn) again led the table for August, followed by those domiciled in Belgium (+€0.9 bn), Sweden (+€0.7 bn), Switzerland (+€0.5 bn), and Norway (+€0.1 bn). Equity funds domiciled in Luxembourg (-€0.5 bn), the United Kingdom (-€0.5 bn), and Denmark (-€0.4 bn) stood at the other end of the table.

For bond funds, products domiciled in Luxembourg (+€9.7 bn) again led the table for August, followed by funds domiciled in Ireland (+€6.8 bn), the United Kingdom (+€1.7 bn), and France (+€1.4 bn) as well as Spain (+€1.3 bn). Meanwhile, the Netherlands (-€0.8 bn), Austria (-€0.2 bn), and Liechtenstein (-€0.1 bn) were the domiciles with the highest net outflows from bond funds.

With regard to mixed-asset products Luxembourg (+€0.7 bn) was the domicile with the highest net inflows, followed by funds domiciled in Ireland (+€0.5 bn), the United Kingdom (+€0.5 bn), Germany (+€0.4 bn), and Spain (+€0.1 bn). On the other side of the table funds domiciled in Jersey showed the highest net outflows     (-€0.03 bn), bettered somewhat by funds domiciled in the Netherlands (-€0.03 bn) and Hungary (-€0.03 bn).

Luxembourg (+€2.3 bn) was the domicile with the highest net inflows into alternatives for August, followed by the United Kingdom (+€0.4 bn), France (+€0.1 bn), and Spain (+€0.1 bn) as well as Belgium (+€0.1 bn). Italy   (-€0.4 bn), bettered somewhat by Ireland (-€0.4 bn) and the Netherlands (-€0.1 bn), stood at the other end of the table.

Fund Flows by Promoters

JP Morgan, with net sales of €6.9 bn, was the best selling fund promoter for August overall, ahead of BlackRock (+€4.7 bn) and HSBC (+€2.8 bn).

Exhibit 5. Ten Best Selling Promoters, August 2016 (Euro Billions)

Source: Lipper

Considering the single-asset bases, BlackRock (+€3.4 bn) was the best selling promoter of bond funds for August, followed by PIMCO (+€2.4 bn), KBC (+€2.0 bn), and AB (+€1.1 bn) as well as Danske (+€1.0 bn). Within the equity space UBI Pramerica (+€1.8 bn) stood at the head of the table, followed by KBC (+€0.9 bn), Aviva (+€0.9 bn), and Swisscanto (+€0.7 bn) as well as State Street (+€0.6 bn). JP Morgan (+€0.5 bn) was the leading promoter of mixed-asset funds in Europe, followed by Union Investment (+€0.4 bn), Allianz (+€0.3 bn), and BNY Mellon (+€0.3 bn) as well as Fidelity (+€0.2 bn). Nordea (+€1.7 bn) was the leading promoter of alternatives funds for the month, followed by Flosbach von Storch (+€0.4 bn), Amundi (+€0.3 bn), and Aviva (+€0.3 bn) as well as Invesco (+€0.2 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €6.9 bn for August. The split of the ten best selling funds by asset type was somewhat in line with the overall sales numbers, since bond funds (with four funds, including two target maturity products) (+€3.3 bn) and equity funds (with four funds) (+€2.3 bn) were the dominant asset types among the top-ten funds list, followed by mixed-asset funds (+€0.7 bn) and absolute return products (+€0.5 bn), with one fund each.

Exhibit 6. Ten Best Selling Funds, August 2016 (Euro Millions)

Source: Lipper