February 24, 2019

Monday Morning Memo: European Investors Shy Further Away From Mutual Funds in January 2019

by Detlef Glow.

The negative trend with regard to fund flows in Europe continued in January, even as the securities markets showed a rebound. As a consequence, January was the ninth month in a row long-term mutual funds posted net outflows after 16 consecutive months of net inflows. It was surprising that bond funds (+€12.7 bn) were the best-selling asset type in the segment of long-term mutual funds, followed by real estate funds (+€1.0 bn). All other asset types faced outflows: alternative UCITS funds (-€7.7 bn), equity funds (-€7.4 bn), mixed-asset funds (-€3.5 bn), commodity funds (-€1.1 bn), and “other” funds (-€1.0 bn).

These fund flows added up to overall net outflows of €7.0 bn from long-term investment funds for January. ETFs contributed inflows of €8.1 bn to these flows.

Money Market Products

Within the current environment, European investors bought back some of their positions in money market products. As a result, money market funds witnessed net inflows of €3.8 bn for January. ETFs investing in money market instruments contributed net outflows of €0.2 bn to these flows.

This flow pattern led the overall fund flows experienced by mutual funds in Europe to overall net outflows of €3.2 bn for January.

Money Market Products by Sector

Money Market EUR (+€13.8 bn) was the best-selling sector overall. Money Market SEK (+€0.4 bn) was the second best-selling money market sector, while Money Market Global (+€0.1 bn), Money Market CZK (+€0.04 bn), and Money Market SGD (+€0.03 bn) rounded out the five best-selling sectors in the money market segment for January. At the other end of the spectrum, Money Market USD (-€7.3 bn) suffered the highest net outflows overall, bettered by Money Market GBP (-€1.8 bn) and Money Market EUR Leveraged (-€1.3 bn). Comparing this flow pattern with the flow pattern for December showed European investors reduced their positions in the USD and the British pound sterling while increasing their positions in the euro. These shifts are rather the opposite of what European investors did in December. These shifts might have been caused by asset allocation decisions, as well as for other reasons such as cash dividends or cash payments since money market funds are also used by corporations as replacements for cash accounts.

Graph 1: Estimated Net Sales by Asset Type, January 2018 (Euro Billions)

European Fund Flow Review, January 2019

Source:  Lipper at Refinitiv

Fund Flows by Sectors

Within the segment of long-term mutual funds, Bond Emerging Markets Global in Hard Currencies (+€4.4 bn) was the best-selling sector, followed by Equity Emerging Markets (+€3.4 bn). Equity Global (+€3.2 bn) was the third best-selling sector, followed by Bond Global USD Hedged (+€2.1 bn) and Bond Emerging Markets Global in Local Currencies (+€1.8 bn).

Graph 2: Ten Top Sectors, January 2018 (Euro Billions)

European Fund Flow Review, January 2019 

Source:  Lipper at Refinitiv

At the other end of the spectrum, Equity Europe (-€3.6 bn) suffered the highest net outflows from long-term mutual funds, bettered by Equity US (-€3.4 bn), Bond EUR Short Term (-€2.6 bn), Equity UK (-€2.5 bn), and Equity Europe ex UK (-€2.4 bn).

Graph 3: Ten Bottom Sectors, January 2018 (Euro Billions)

European Fund Flow Review, January 2019

Source: Lipper at Refinitiv

Fund Flows by Markets (Fund Domiciles)

Single-fund domicile flows (including those to money market products) showed, in general, a negative picture for January, with only 12 of the 34 markets covered in this report showing net inflows and 22 showing net outflows. France (+16.0 bn), driven by money market products (+€19.1 bn), was the fund domicile with the highest net inflows, followed by Sweden (+€2.6 bn), Switzerland (+€2.3 bn), Germany (+€0.8 bn), and Norway (+€0.2 bn). On the other side of the table was Luxembourg (-€9.9 bn), the fund domicile with the highest outflows, which was bettered by the United Kingdom (-€6.8 bn) and Ireland (-€3.0 bn). It is noteworthy that the flows in Ireland and Luxembourg were caused by in- and outflows from money market products -€7.1 bn and -€5.8 bn respectively.

Graph 4: Estimated Net Sales by Fund Domiciles, January 2018 (Euro Billions)

European Fund Flow Review, January 2019

Source: Lipper at Refinitiv

Within the bond sector, funds domiciled in Ireland (+€7.1 bn) led the table, followed by Luxembourg (+€6.3 bn), Switzerland (+€1.6 bn), Germany (+€0.4 bn), and Sweden (+€0.3 bn). Bond funds domiciled in France (-€0.9 bn), Spain (-€0.7 bn), and Belgium (-€0.6 bn) stood at the other end of the table.

For equity funds, products domiciled in Belgium (+€1.9 bn) led the table for January, followed by funds domiciled in Sweden (+€1.9 bn), Norway (+€0.4 bn), Spain (+€0.2 bn), and Switzerland (+€0.1 bn). Meanwhile, the United Kingdom (-€4.7 bn), Luxembourg (-€3.8 bn), and France (-€1.1 bn) were the domiciles with the highest net outflows from equity funds.

In regard to mixed-asset products, the United Kingdom (+€0.6 bn) was the domicile with the highest net inflows, followed by funds domiciled in Switzerland (+€0.5 bn), Sweden (+€0.2 bn), Belgium (+€0.1 bn), and Austria (+€0.1 bn). In contrast, Luxembourg (-€3.0 bn), France (-€0.9 bn), and Italy (-€0.5 bn) were the domiciles with the highest net outflows from mixed-asset funds.

France (+€0.1 bn) was the domicile with the highest net inflows into alternative UCITS funds for January, followed by Belgium (+€0.02 bn), while no other fund domicile showed inflows. Meanwhile, Luxembourg (-€2.5 bn), Ireland (-€2.1 bn), and the United Kingdom (-€1.8 bn), stood at the other end of the table.

Fund Flows by Promoters

Generali, with net sales of €3.3 bn, was the best-selling fund promoter for January overall, ahead of Credit Mutuel (+€2.2 bn) and BNP Paribas Asset Management (+€2.1 bn). It is noteworthy that the flows for Generali, Credit Mutuel and BNP Paribas Asset Management were driven by money market funds.

Table 1: Ten Best Selling Promoters, January 2018 (Euro Billions)

European Fund Flow Review, January 2019

Source: Lipper at Refinitiv

Considering the single-asset classes, BlackRock (+€3.8 bn) was the best-selling promoter of bond funds, followed by PIMCO (+€2.2 bn), AB (+€1.1 bn), Eastspring (+€1.0 bn), and JP Morgan (+€0.8 bn).

Within the equity space, KBC (+€1.8 bn) stood at the head of the table, followed by Link (+€1.6 bn), UBS (+€0.8 bn), Swedbank (+€0.7 bn), and AB (+€0.6 bn).

Aviva (+€0.5 bn) was the leading promoter of mixed-asset funds in Europe, followed by Union Investment (+€0.3 bn), Vaudoise (+€0.2 bn), Flossbach von Storch (+€0.2 bn), and AG Insurance (+€0.1 bn).

H2O Asset Management (+€0.6 bn) was the leading promoter of alternative UCITS funds for the month, followed by BMO (+€0.3 bn), DWS Group (+€0.2 bn), Flossbach von Storch (+€0.1 bn), and SEB (+€0.1 bn).

Best-Selling Funds

The ten best-selling long-term funds gathered at the share-class level total net inflows of €30.2 bn for January. Mixed-asset funds dominated the ranking of the asset types with regard to the ten best-selling funds (+€19.4 bn), followed by equity funds (+€1.0 bn) and bond funds (+€0.9 bn).

Table 2: Ten Best Selling Long-Term Funds, January 2018 (Euro Millions)

European Fund Flow Review, January 2019

Source: Lipper at Refinitiv

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