Monday Morning Memo: Mixed-Asset Funds Are Back on European Investors’ Menus in December 2017

December was the twelfth consecutive month showing a positive picture for long-term mutual funds. European fund promoters enjoyed net inflows into mixed-asset funds (+€8.7 bn), followed by bond funds (+€7.6 bn), alternative UCITS funds (+€3.4 bn), equity funds (+€2.4 bn), and real estate funds (+€0.5 bn). Meanwhile commodity funds (-€0.01 bn) and “other” funds (-€0.8 bn) faced net outflows.

These fund flows added up to overall net inflows of €21.7 bn into long-term investment funds for December. ETFs contributed €4.7 bn to these inflows.

Money Market Products

Money market products (-€19.5 bn) were the asset type with the highest net outflows overall for December. In line with their actively managed peers ETFs investing in money market instruments posted net outflows of €0.2 bn.

This flow pattern led the overall fund flows to mutual funds in Europe to net inflows of €2.2 bn for December and a positive €756.9 bn for 2017.

Money Market Products by Sector

Despite the fact that money market funds faced overall net outflows, Money Market GBP (+€12.8 bn) was the best selling Lipper classification for December, followed by Money Market EUR Leveraged (+€0.8 bn) and Money Market PLN (+€0.2 bn). At the other end of the spectrum Money Market EUR (-€18.9 bn) suffered the highest net outflows overall, bettered by Money Market USD (-€13.9 bn) and Money Market Global (-€0.5 bn). Comparing this flow pattern with the flow pattern for November 2017 showed that European investors bought further back into the British pound sterling in December while they further reduced their holdings in the U.S. dollar. These shifts might have been caused by asset allocation decisions as well as for other reasons such as cash dividends or payments, since money market funds are also used by corporations as replacements for cash accounts.

Graph 1: Estimated Net Sales by Asset Type, December 2017 (Euro Billions)

Source: Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Bond EUR Short Term (+€3.3 bn) was the best selling sector, followed by Equity US (+€2.4 bn) along with Bond Global USD Hedged (+€2.4 bn) and Bond Emerging Markets Global in Hard Currencies (+€2.3 bn) as well as Mixed Asset EUR Balanced–Global (+€1.9 bn).

Graph 2: Ten Top Sectors, December 2017 (Euro Billions)

Source: Lipper

At the other end of the spectrum Equity Eurozone (-€2.0 bn) suffered the highest net outflows from long-term mutual funds, bettered somewhat by Bond USD High Yield (-€1.8 bn) and Bond EMU Government Medium Term (-€1.1 bn) as well as Target Maturity Bond EUR 2020+ (-€0.9 bn) and Bond Europe High Yield (-€0.8 bn).

Graph 3: Ten Bottom Sectors, December 2017 (Euro Billions)

Source: Lipper

Fund Flows by Markets (Fund Domiciles)

Single fund domicile flows (including those to money market products) showed in general a positive picture for December, with 18 of the 34 markets covered in this report showing net inflows and 16 showing net outflows. Ireland (+€17.0 bn) was the fund domicile with the highest net inflows, followed by Luxembourg (+€4.1 bn), the United Kingdom (+€2.6 bn), Germany (+€2.4 bn), and Sweden (+€1.5 bn).On the other side of the table France (driven by money market funds) was the single fund domicile with the highest net outflows (-€21.6 bn), bettered by Spain (-€2.0 bn) and Switzerland (-€1.0 bn).

Graph 4: Estimated Net Sales by Fund Domiciles, December 2017 (Euro Billions)

Source: Lipper

Within the bond sector, funds domiciled in Ireland (+€6.3 bn) led the table for December, followed by those domiciled in Luxembourg (+€1.5 bn), the United Kingdom (+€1.1 bn), France (+€0.5 bn), and Switzerland (+€0.4 bn). Bond funds domiciled in Spain (-€1.9 bn), Norway (-€0.3 bn), and Italy (-€0.3 bn) stood at the other end of the table.

For equity funds, products domiciled in Ireland (+€3.5 bn) led the table for December, followed by funds domiciled in the United Kingdom (+€1.1 bn), Sweden (+€0.6 bn), and Belgium (+€0.3 bn) as well as Italy (+€0.1 bn). Meanwhile, Spain (-€1.2 bn), France (-€1.2 bn), and Luxembourg (-€0.4 bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed-asset funds Luxembourg (+€3.8 bn) was the domicile with the highest net inflows, followed by funds domiciled in the United Kingdom (+€1.7 bn), Spain (+€1.2 bn), Germany (+€0.9 bn), and Sweden (+€0.3 bn). Opposite to this, Jersey (-€0.1 bn), Belgium (-€0.1 bn), and the Netherlands (-€0.1 bn) were the domiciles with the highest net outflows from mixed-asset funds.

Ireland (+€2.2 bn) was the domicile with the highest net inflows into alternative UCITS funds for December, followed by Luxembourg (+€1.6 bn), France (+€0.5 bn), and Germany (+€0.3 bn) as well as Sweden (+€0.2 bn). The United Kingdom (-€0.8 bn), bettered by Italy (-€0.3 bn) and Denmark (-€0.2 bn), stood at the other end of the table.

Fund Flows by Promoters

Legal & General, with net sales of €4.6 bn, was the best selling fund promoter for December overall, ahead of Pimco (+€3.4 bn) and Morgan Stanley (+€3.3 bn).

Table 1: Ten Best Selling Promoters, December 2017 (Euro Billions)

Source: Lipper

Considering the single-asset bases, PIMCO (+€3.0 bn) was once again the best selling promoter of bond funds, followed by BlackRock (+€1.5 bn), Eurizon Capital (+€1.4 bn), and Deutsche Bank (+€1.0 bn) as well as Morgan Stanley (+€0.8 bn).

Within the equity space Deutsche Bank (+€1.3 bn) stood once again at the head of the table, followed by UBS (+€1.1 bn), Amundi (+€1.0 bn), and Vanguard Group (+€0.9 bn) as well as BlackRock (+€0.8 bn).

Allianz (+€0.7 bn) was the leading promoter of mixed-asset funds in Europe for December, followed by M&G (+€0.7 bn), BBVA (+€0.6 bn), and JP Morgan (+€0.6 bn) as well as Union Investment (+€0.5 bn).

Assenagon (+€0.8 bn) was the leading promoter of alternatives funds for the month, followed by Legg Mason (+€0.5 bn), BlackRock (+€0.4 bn), and H2O Asset Management (+€0.4 bn) as well as GAM (+€0.4 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €7.1 bn for December. Since mixed-asset funds dominated the overall sales numbers, it was surprising that equity funds (+€2.9 bn) dominated the sales table for the ten top single funds, followed by bond funds (+€2.8 bn) and alternative UCITS funds (+€0.7 bn).

Table 2: Ten Best Selling Long-Term Funds, December 2017 (Euro Millions)

Source: Lipper