by Detlef Glow.
European investors pulled back from long-term mutual funds as the market environment and the general sentiment turned negative. As a consequence, May was the first month posting net outflows from long-term mutual funds after 16 consecutive months showing net inflows. That said, European fund promoters still enjoyed net inflows into mixed-asset funds (+€2.5 bn), followed by commodity funds (+€1.4 bn) and alternative UCITS funds (+€1.4 bn) as well as real estate funds (+€0.4 bn), while net flows to “other” funds (-€0.8 bn), equity funds (-€7.4 bn) and bond funds (-€15.9 bn) were negative.
These fund flows added up to overall net outflows of €18.5 bn into long-term investment funds for May. ETFs contributed €1.6 bn to these flows.
Money Market Products
Even though one would expect to see net inflows into money market funds in this kind of market environment, money market products also faced net outflows for May (-€6.8 bn). In line with their actively managed peers, ETFs investing in money market instruments posted net outflows of €0.1 bn.
This flow pattern led the overall fund flows to mutual funds in Europe to overall net outflows of €25.3 bn for May and to estimated net inflows of €97.9 bn for the year 2018 so far.
Money Market Products by Sector
Money Market GBP (+€5.9 bn), Money Market SEK (+€0.2 bn), and Money Market AUD (+€0.1 bn) were the best selling money market sectors. At the other end of the spectrum Money Market EUR (-€7.2 bn) suffered the highest net outflows overall, bettered by Money Market USD (-€4.9 bn) and Money Market EUR Leveraged (-€0.4 bn). Comparing this flow pattern with the flow pattern for April showed that European investors decreased their positions in the euro and the U.S. dollar while building their position in the British pound sterling, which they had reduced the previous month. 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, May 2018 (Euro Billions)
Fund Flows by Sectors
Within the segment of long-term mutual funds Equity Global (+€5.9 bn) was the best selling sector, followed by Mixed-Asset USD Balanced-US (+€1.4 bn), Equity Sector Information Technology (+€1.1 bn), and Commodity Precious Metals (+€1.0 bn) as well as Equity China (+€0.8 bn).
Graph 2: Ten Top Sectors, May 2018 (Euro Billions)
At the other end of the spectrum Bond USD (-€2.6 bn) suffered the highest net outflows from long-term mutual funds, bettered by Bond USD High Yield (-€2.2 bn) and Mixed-Asset EUR Flexible-Global (-€2.2 bn) as well as Equity Europe (-€1.8 bn) and Equity Emerging Markets Global (-€1.7 bn).
Graph 3: Ten Bottom Sectors, May 2018 (Euro Billions)
Fund Flows by Markets (Fund Domiciles)
Single fund domicile flows (including those to money market products) showed in general a negative picture for May, with only 9 of the 33 markets covered in this report showing net inflows and 24 showing net outflows. Ireland (+€5.9 bn) was the fund domicile with the highest net inflows, followed at a distance by Sweden (+€1.7 bn), Jersey (+€0.8 bn), Belgium (+€0.7 bn), and Germany (+€0.3 bn).On the other side of the table Luxembourg (-€15.2 bn) was the single fund domicile with the highest net outflows, bettered by France (-€9.8 bn) and Italy (-€2.9 bn). It is noteworthy that the overall net sales in Ireland and the overall outflows in Luxembourg and France were impacted by shifts in the money market segment.
Graph 4: Estimated Net Sales by Fund Domiciles, May 2018 (Euro Billions)
Within the bond sector, funds domiciled in Denmark (+€0.5 bn) led the table for May, followed by those domiciled in Sweden (+€0.5 bn), France (+€0.4 bn), Finland (+€0.1 bn), and Liechtenstein (+€0.1 bn). Bond funds domiciled in Luxembourg (-€11.9 bn), Ireland (-€3.1 bn), and Italy (-€0.7 bn) stood at the other end of the table.
For equity funds, products domiciled in Ireland (+€2.7 bn) led the table for May, followed by funds domiciled in Belgium (+€1.8 bn), Sweden (+€0.6 bn), and Austria (+€0.1 bn) as well as Norway (+€0.1 bn). Meanwhile, Luxembourg (-€3.8 bn), the United Kingdom (-€2.9 bn), and France (-€1.8 bn) were the domiciles with the highest net outflows from equity funds.
With regard to mixed-asset products Luxembourg (+€1.8 bn) was the domicile with the highest net inflows, followed by funds domiciled in Germany (+€0.8 bn), Belgium (+€0.5 bn), Spain (+€0.5 bn), and France (+€0.3 bn). In contrast, Ireland (-€1.5 bn), Italy (-€0.1 bn), and Jersey (-€0.1 bn) were the domiciles with the highest net outflows from mixed-asset funds.
France (+€1.3 bn) was the domicile with the highest net inflows into alternative UCITS funds for May, followed by Luxembourg (+€1.0 bn), Sweden (+€0.3 bn), and Ireland (+€0.1 bn) as well as Belgium (+€0.1 bn). Italy (-€1.1 bn), bettered by the United Kingdom (-€0.3 bn) and Finland (-€0.1 bn), stood at the other end of the table.
Fund Flows by Promoters
Legal & General, with net sales of €5.4 bn, was the best selling fund promoter for May overall, ahead of BlackRock (+€4.0 bn) and Goldman Sachs (+€3.4 bn). It is noteworthy that the overall net sales of all three promoters were driven by their net sales in the money market segment.
Table 1: Ten Best Selling Promoters, May 2018 (Euro Billions)
Considering the single-asset bases, Carmignac (+€1.1 bn) was the best selling promoter of bond funds, followed by Vanguard (+€0.7 bn), Ashmore (+€0.7 bn), and Danske (+€0.6 bn) as well as Credit Suisse Group (+€0.5 bn).
Within the equity space UBS (+€3.2 bn) stood at the head of the table, followed by KBC (+€1.6 bn), Union Investment (+€1.3 bn), and Morgan Stanley (+€0.6 bn) as well as Neuflize (+€0.6 bn).
Allianz (+€1.3 bn) was the leading promoter of mixed-asset funds in Europe for May, followed by Union Investment (+€0.6 bn), JP Morgan (+€0.5 bn), and M&G (+€0.5 bn) as well as Amundi (+€0.4 bn).
H2O Asset Management (+€1.2 bn) was once again the leading promoter of alternative UCITS funds for the month, followed by BMO (+€1.1 bn), BlackRock (+€1.0 bn), and Old Mutual (+€0.9 bn) as well as Handelsbanken (+€0.3 bn).
Best Selling Funds
The ten best selling long-term funds gathered at the share-class level total net inflows of €8.3 bn for May. Since mixed-asset funds dominating the overall sales numbers, it was surprising that no mixed-asset fund is in the ranking of the ten best selling funds. Equity funds (+€5.4 bn) dominated the sales table for the ten top single funds, followed by bond funds (+€1.9 bn) and alternative UCITS funds (+€1.0 bn).
Table 2: Ten Best Selling Long-Term Funds, May 2018 (Euro Millions)