January 20, 2020

Monday Morning Memo: European Fund-Flow Trends, December 2019

by Detlef Glow.

Following the good performance of the equity markets globally, European investors continued to be in risk-on mode in December. The sentiment of investors might have been supported by a calm market during the trade war between the U.S. and China, as well as a clearer situation around Brexit after the general election in the UK, since both led to a better outlook for general economic growth and company earnings for the year ahead. As a result, December was the tenth month during which long-term mutual funds posted net inflows in 2019. Equity funds (+€26.3 bn) were the best-selling asset type in the segment of long-term mutual funds, followed by bond funds (+€21.0 bn), mixed-assets funds (+€6.8 bn), commodity funds (+€0.7 bn), and real estate funds (+€0.4 bn). Conversely, alternative UCITS funds (-€5.6 bn), and “other” funds (-€2.1 bn) faced outflows.

These fund flows added up to overall net inflows of €47.4 bn into long-term investment funds for December. ETFs contributed inflows of €22.5 bn to these flows.

Money Market Products

The current market environment led European investors to sell money market products. As a result, money market funds were witnessing estimated net outflows of €8.0 bn for December. ETFs investing in money market instruments contributed estimated net inflows of €0.2 bn to the total, opposite to their actively managed peers.

This flow pattern led to overall net inflows of €39.4 bn for December, and inflows of €303.9 bn for mutual funds in Europe for 2019.

Money Market Products by Sector

Money Market USD (+€9.8 bn) was once again the best-selling sector overall, followed by Money Market GBP (+€5.9 bn) and Money Market CHF (+€0.5 bn). At the other end of the spectrum, Money Market EUR (-€23.5 bn) suffered once again the highest net outflows overall, bettered by Money Market Global (-€0.3 bn) and Money Market NOK (-€0.3 bn).

Comparing this flow pattern with the flow pattern for October revealed that European investors further built up their positions in the U.S. dollar and the pound sterling while further selling money market EUR. In conjunction with the asset allocation decisions of portfolio managers, these shifts might have also been caused by corporate actions 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, December 2019 (Euro Billions)

European Fund Flow Review, December 2019

Source: Lipper from Refinitiv

Fund Flows by Sectors

In line with the general fund flows trend, Equity Global (+€7.3 bn) was the best-selling sector in the segment of long-term mutual funds, followed by Equity US (+€5.9 bn). Equity Emerging Markets Global (+€3.9 bn) was the third best-selling long-term sector, followed by Mixed Asset EUR Flex – Global (+€2.4 bn) and Bond Emerging Markets Global HC (+€2.4 bn).

Graph 2: Ten Top Sectors, December 2019 (Euro Billions)

European Fund Flow Review, December 2019

Source: Lipper from Refinitiv

At the other end of the spectrum, Unclassified (-€1.6 bn) suffered the highest net outflows in the segment of long-term funds, bettered by Absolute Return GBP Medium (-€1.5 bn), Bond USD Medium Term (-€1.4 bn), Equity Sweden (-€1.3 bn), and Hedge/Managed Futures/CTA (-€1.1 bn).

Graph 3: Ten Bottom Sectors, December 2019 (Euro Billions)

European Fund Flow Review, December 2019

Source: Lipper from Refinitiv

Fund Flows by Markets (Fund Domiciles)

Single-fund domicile flows (including those to money market products) showed, in general, a positive picture for the fund-flows week of December 22. Thirty four markets covered in this report showed estimated net inflows and 12 showed net outflows. Ireland (+€30.5 bn) was the fund domicile with the highest net inflows, followed by Luxembourg (+€24.0 bn), Switzerland (+€5.9 bn), the U.K. (+€3.7 bn), and Spain (+€1.4 bn). On the other side of the table, France (-€28.9 bn) was the fund domicile with the highest outflows, bettered by Italy (-€0.5 bn) and the Netherlands (-€0.5 bn). It is noteworthy that the fund flows for France (-€26.5 bn), Ireland (+€10.9 bn), and Luxembourg (+€6.5 bn) were impacted by flows in and out of money market products.

Graph 4: Estimated Net Sales by Fund Domiciles, December 2019 (Euro Billions)

European Fund Flow Review, December 2019

Source: Lipper from Refinitiv

Within the bond sector, funds domiciled in Ireland (+€11.0 bn) led the table, followed by Luxembourg (+€7.1 bn), the U.K. (+€3.1 bn), Norway (+€0.8 bn), and Switzerland (+€0.7 bn). Bond funds domiciled in France (-€1.9 bn), Finland (-€0.4 bn), and Denmark (-€0.4 bn) were at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€11.4 bn) led the table for December, followed by funds domiciled in Ireland (+€8.4 bn), Switzerland (+€3.8 bn), the U.K. (+€2.4 bn), and Belgium (+€0.4 bn). Meanwhile, Germany (-€0.9 bn), Norway (-€0.2 bn), and Italy (-€0.2 bn) were the domiciles with the highest estimated net outflows from equity funds.

Regarding mixed-assets products, Luxembourg (+€2.4 bn) was the domicile with the highest net inflows, followed by funds domiciled in Spain (+€0.8 bn), the U.K. (+€0.6 bn), Germany (+€0.5 bn), and Austria (+€0.4 bn). In contrast, France (-€0.3 bn), Jersey (-€0.1 bn), and Andorra (-€0.03 bn) were the domiciles with the highest estimated net outflows from mixed-assets funds.

Spain (+€0.1 bn) was the domicile with the highest estimated net inflows into alternative UCITS funds for December, followed by Germany (+€0.1 bn) and Denmark (+€0.1 bn). Meanwhile, Luxembourg (-€2.1 bn), the U.K. (-€1.6 bn), and the Netherlands (-€1.1 bn) were at the other end of the table.

Fund Flows by Promoters

BlackRock was the best-selling fund promoter for December overall, with net sales of €6.3 bn, ahead of JP Morgan (+€5.7 bn) and Pictet (+€5.5 bn).

Table 1: Ten Best-Selling Promoters, December 2019 (Euro Billions)

Source: Lipper from Refinitiv

Considering the single-asset classes, BlackRock (+€3.6 bn) was the best-selling promoter of bond funds, followed by Aviva (+€2.4 bn), PIMCO (+€2.1 bn), Vanguard Group (+€1.1 bn), and Eurizon Capital (+€1.0 bn).

Within the equity space, Pictet (+€4.6 bn) led the table, followed by Vanguard Group (+€2.9 bn), BlackRock (+€2.7 bn), UBS (+€2.6 bn), and Amundi (+€1.9 bn).

Eurizon Capital (+€1.6 bn) was the leading promoter of mixed-assets funds in Europe, followed by Vanguard Group (+€0.7 bn), JP Morgan (+€0.5 bn), Flossbach von Storch (+€0.5 bn), and AXA (+€0.4 bn).

GAM (+€0.3 bn) was the leading promoter of alternative UCITS funds for the month, followed by DNCA Finance (+€0.2 bn), Man Investments (+€0.2 bn), H2O Asset Management (+€0.2 bn), and Generali (+€0.1 bn).

Best-Selling Funds

The 10 best-selling long-term funds, gathered at the share class level, amounted to €13.3 bn of estimated net inflows for December. The general fund-flows trend for the 10 best-selling funds was in line with the overall fund flows trend in Europe, as equity funds dominated the ranking of the asset types with regard to the 10 best-selling funds (+€7.7 bn), followed by bond funds (+€4.9 bn), and mixed-asset funds (+€0.7 bn).

Table 2: Ten Best-Selling Long-Term Funds, December 2019 (Euro Millions)

Source: Lipper from Refinitiv

The views expressed are the views of the author, not necessarily those of Lipper or Refinitiv.

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