February 24, 2020

Monday Morning Memo: European Fund-Flow Trends, January 2020

by Detlef Glow.

Following the good performance of the equity markets globally, European investors continued to be in risk-on mode in January. Investor sentiment might have been supported by positive news regarding the trade war between the U.S. and China, as well as a clearer situation around Brexit, since both led to a better outlook for general economic growth and company earnings for the year ahead. Despite this, there are concerns over global economic growth which have been triggered by the outbreak of the coronavirus, the effects of which on supply chains and corporate profits are not yet known. Nevertheless, long-term mutual funds posted strong net inflows in January 2020. Bond funds (+€31.6 bn) were the best-selling asset type in the long-term mutual funds segment, followed by equity funds (+€14.8 bn), mixed-assets funds (+€14.1 bn), commodity funds (+€2.4 bn), and real estate funds (+€1.4 bn). Conversely, alternative UCITS funds (-€1.1 bn) and “other” funds (-€1.2 bn) faced outflows.

These fund flows added up to overall net inflows of €62.0 bn into long-term investment funds for January. ETFs contributed inflows of €12.5 bn to these flows.

Money Market Products

The current market environment led European investors to buy money market products. As a result, money market funds were the best-selling asset type overall for January, witnessing estimated net inflows of €44.4 bn. ETFs investing in money market instruments contributed estimated net outflows of €0.4 bn to the total.

This flow pattern led to overall net inflows of €106.5 bn for January.

Money Market Products by Sector

Money Market EUR (+€37.3 bn) was the best-selling sector overall, followed by Money Market GBP (+€4.3 bn) and Money Market USD (+€2.9 bn). At the other end of the spectrum, Money Market Global (-€0.2 bn) suffered the highest net outflows overall, bettered by Money Market CHF (-€0.2 bn) and Money Market Leveraged (-€0.1 bn).

Comparing this flow pattern with the flow pattern for December revealed that European investors bought back into the euro and further built up their positions in the U.S. dollar and the pound sterling. 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, January 2020 (Euro Billions)

European Fund Flows, January 2020

Source: Refinitiv Lipper

Fund Flows by Sectors

Equity Global (+€9.8 bn) was once again the best-selling sector in the segment of long-term mutual funds, followed by Bond Global USD (+€5.0 bn). Equity Emerging Markets Global (+€2.7 bn) was the third best-selling long-term sector, followed by Mixed Asset EUR Balanced – Global (+€2.6 bn) and Bond USD (+€2.5 bn).

Graph 2: Ten Top Sectors, January 2020 (Euro Billions)

Source: Refinitiv Lipper

At the other end of the spectrum, Equity Eurozone (-€2.8 bn) suffered the highest net outflows in the segment of long-term funds, bettered by Equity Asia Pacific ex Japan (-€2.3 bn), Equity US (-€2.1 bn), Real Estate Switzerland (-€1.0 bn), and Bond EUR Short Term (-€1.0 bn).

Graph 3: Ten Bottom Sectors, January 2020 (Euro Billions)

Source: Refinitiv Lipper

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 during January. Twenty-seven of the 34 markets covered in this report showed estimated net inflows and seven showed net outflows. Luxembourg (+€32.4 bn) was the fund domicile with the highest net inflows, followed by France (+€32.1 bn), Ireland (+€19.0 bn), Switzerland (+€8.0 bn), and the U.K. (+€6.7 bn). On the other side of the table, the Netherlands (-€2.9 bn) was the fund domicile with the highest outflows, bettered by Italy (-€0.7 bn) and Andorra (-€0.1 bn). It is noteworthy that the fund flows for France (€32.9 bn), Luxembourg (+€5.0 bn), and Ireland (+€4.6 bn) were impacted by flows into money market products.

Graph 4: Estimated Net Sales by Fund Domiciles, January 2020 (Euro Billions)

Source: Refinitiv Lipper

Within the bond sector, funds domiciled in Luxembourg (+€12.4 bn) led the table, followed by Ireland (+€11.2 bn), Switzerland (+€3.8 bn), the U.K. (+€0.9 bn), and Sweden (+€0.7 bn). Bond funds domiciled in Italy (-€0.4 bn), Norway (-€0.2 bn), and Austria (-€0.1 bn) were at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€10.2 bn) led the table for January, followed by funds domiciled in the U.K. (+€4.7 bn), Switzerland (+€2.0 bn), Belgium (+€1.2 bn), and Norway (+€0.8 bn). Meanwhile, the Netherlands (-€4.0 bn), France (-€1.5 bn), and Sweden (-€0.4 bn) were the domiciles with the highest estimated net outflows from equity funds.

Regarding mixed-assets products, Luxembourg (+€4.5 bn) was the domicile with the highest net inflows, followed by funds domiciled in Switzerland (+€2.3 bn), Spain (+€2.0 bn), the U.K. (+€1.1 bn), and Ireland (+€0.7 bn). In contrast, Sweden (-€0.03 bn), Jersey (-€0.02 bn), and the Isle of Man (-€0.02 bn) were the domiciles with the highest estimated net outflows from mixed-assets funds.

Ireland (+€0.5 bn) was the domicile with the highest estimated net inflows into alternative UCITS funds for January, followed by France (+€0.1 bn) and Liechtenstein (+€0.1 bn). Meanwhile, Italy (-€0.7 bn), the U.K. (-€0.7 bn), and Germany (-€9.4 bn) were at the other end of the table.

Fund Flows by Promoters

BlackRock was the best-selling fund promoter for January overall, with net sales of €16.6 bn, ahead of Amundi (+€14.0 bn) and BNP Paribas Asset Management (+€8.4 bn).

Table 1: Ten Best-Selling Promoters, January 2020 (Euro Billions)

European Fund Flows, January 2020

Source: Refinitiv Lipper

Considering the single-asset classes, BlackRock (+€4.3 bn) was the best-selling promoter of bond funds, followed by PIMCO (+€3.0 bn), JP Morgan (+€2.8 bn), Credit Suisse Group (+€2.1 bn), and Vanguard Group (+€1.4 bn).

Within the equity space, BlackRock (+€5.3 bn) led the table, followed by UBS (+€2.8 bn), Pictet (+€1.6 bn), DWS Group (+€1.3 bn), and AXA (+€1.2 bn).

AXA (+€1.3 bn) was the leading promoter of mixed-assets funds in Europe, followed by Flossbach von Storch (+€0.9 bn), JP Morgan (+€0.8 bn), HSBC (+€0.8 bn), and Santander (+€0.7 bn).

DWS Group (+€0.4 bn) was the leading promoter of alternative UCITS funds for the month, followed by H2O Asset Management (+€0.4 bn), Maitland (+€0.3 bn), Man Investments (+€0.3 bn), and Insight (+€0.3 bn).

Best-Selling Funds

The 10 best-selling long-term funds, gathered at the share class level, amounted to €7.0 bn of estimated net inflows for January. The general fund-flows trend for the 10 best-selling funds was in line with the overall fund flows trend in Europe, as bond funds dominated the ranks of asset types with regard to the 10 best-selling funds (+€3.1 bn), followed by equity funds (+€2.4 bn) and mixed-assets funds (+€1.5 bn).

Table 2: Ten Best-Selling Long-Term Funds, January 2020 (Euro Millions)

European Fund Flows, January 2020

Source: Refinitiv Lipper

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

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