March 23, 2020

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

by Detlef Glow.

European investors switched to a risk-off mode in February due to uncertainties over a possible shortage in supply chains caused by the outbreak of the coronavirus in China and the respective increased volatility on the global equity markets. Nevertheless, long-term mutual funds posted net inflows for the month. Bond funds (+€30.4 bn) were the best-selling asset type in the long-term mutual funds segment, followed by mixed-assets funds (+€6.2 bn), commodity funds (+€1.0 bn), and “other” funds (+€0.1 bn). Conversely, equity funds (-€1.4 bn), real estate funds (-€2.3 bn), and alternative UCITS funds (-€4.3 bn) faced outflows.

These fund flows added up to overall net inflows of €29.8 bn into long-term investment funds for February. ETFs contributed inflows of €3.2 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 faced the highest outflows overall for February, witnessing estimated net outflows of €7.2 bn. In line with their actively managed peers, ETFs investing in money market instruments contributed estimated net outflows of €0.1 bn to the total.

This flow pattern led to overall net inflows of €22.6 bn for February and overall estimated inflows of €129.6 bn year to date.

Money Market Products by Sector

Money Market EUR (+€4.2 bn) was the best-selling money market sector, followed by Money Market SEK (+€0.3 bn) and Money Market CHF (+€0.1 bn). At the other end of the spectrum, Money Market USD (-€6.6 bn) suffered the highest net outflows overall, bettered by Money Market GBP (-€5.3 bn) and Money Market NOK (-€0.1 bn).

Comparing this flow pattern with the flow pattern for January revealed that European investors bought back into the euro and reduced 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, February 2020 (Euro Billions)

European Fund Flows February 2020

Source: Refinitiv Lipper

Fund Flows by Sectors

Equity Global (+€6.7 bn) was once again the best-selling sector in the segment of long-term mutual funds, followed by Bond Global USD (+€6.0 bn). Bond USD (+€2.8 bn) was the third best-selling long-term sector, followed by Bond EUR (+€2.0 bn) and Bond Global Corporates EUR (+€1.9 bn).

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

Source: Refinitiv Lipper

At the other end of the spectrum, Real Estate UK (-€3.7 bn) suffered the highest net outflows in the segment of long-term funds, bettered by Equity Eurozone (-€2.8 bn), Equity US (-€2.5 bn), Equity Europe (-€2.0 bn), and Bond EUR Short Term (-€1.7 bn).

Graph 3: Ten Bottom Sectors, February 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 during February. Twenty-four of the 34 markets covered in this report showed estimated net inflows and 10 showed net outflows. Luxembourg (+€8.3 bn) was the fund domicile with the highest net inflows, followed by Ireland (+€4.2 bn), Spain (+€2.4 bn), Denmark (+€2.3 bn), and Switzerland (+€1.9 bn). On the other side of the table, the Netherlands (-€1.8 bn) was the fund domicile with the highest outflows, bettered by Italy (-€0.6 bn) and the U.K. (-€0.5 bn). It is noteworthy that the fund flows for Luxembourg (-€6.7 bn), and Ireland (-€1.9 bn) were impacted by flows into money market products.

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

European Fund Flows February 2020

Source: Refinitiv Lipper

Within the bond sector, funds domiciled in Luxembourg (+€14.5 bn) led the table, followed by Ireland (+€7.0 bn), Switzerland (+€1.7 bn), Belgium (+€1.3 bn), and France (+€1.2 bn). Bond funds domiciled in Italy (-€0.2 bn), Jersey (-€0.1 bn), and Norway (-€0.04 bn) were at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€2.7 bn) led the table for February, followed by funds domiciled in the U.K. (+€1.9 bn), Ireland (+€1.4 bn), Denmark (+€0.6 bn), and Spain (+€0.2 bn). Meanwhile, the Netherlands (-€2.9 bn), France (-€1.4 bn), and Switzerland (-€1.2 bn) were the domiciles with the highest estimated net outflows from equity funds.

Regarding mixed-assets products, Spain (+€2.4 bn) was the domicile with the highest net inflows, followed by funds domiciled in the U.K. (+€1.2 bn), Switzerland (+€1.0 bn), Belgium (+€0.9 bn), and Italy (+€0.6 bn). In contrast, Ireland (-€0.7 bn), Luxembourg (-€0.5 bn), and France (-€0.3 bn) were the domiciles with the highest estimated net outflows from mixed-assets funds.

Jersey (+€0.2 bn) was the domicile with the highest estimated net inflows into alternative UCITS funds for February, followed by France (+€0.2 bn) and Denmark (+€0.1 bn). Meanwhile, Ireland (-€1.9 bn), Luxembourg (-€1.3 bn), and Italy (-€0.7 bn) were at the other end of the table.

Fund Flows by Promoters

PIMCO was the best-selling fund promoter for February overall, with net sales of €2.9 bn, ahead of Goldman Sachs (+€2.6 bn) and Fidelity (+€2.5 bn).

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

European Fund Flows February 2020

Source: Refinitiv Lipper

Considering the single-asset classes, PIMCO (+€2.7 bn) was the best-selling promoter of bond funds, followed by JP Morgan (+€2.1 bn), KBC (+€1.8 bn), AB (+€1.6 bn), and UBS (+€1.4 bn).

Within the equity space, Morgan Stanley (+€2.2 bn) led the table, followed by Fidelity (+€1.3 bn), Pictet (+€1.1 bn), Vanguard Group (+€1.0 bn), and Goldman Sachs (+€0.8 bn).

KBC (+€0.8 bn) was the leading promoter of mixed-assets funds in Europe, followed by Santander (+€0.8 bn), Flossbach von Storch (+€0.6 bn), Vanguard Group (+€0.5 bn), and Union Investment (+€0.5 bn).

Man Investments (+€0.5 bn) was the leading promoter of alternative UCITS funds for the month, followed by H2O Asset Management (+€0.4 bn), DWS Group (+€0.3 bn), Nordea (+€0.2 bn), and Pictet (+€0.2 bn).

Best-Selling Funds

The 10 best-selling long-term funds, gathered at the share class level, experienced net inflows of €12.0 bn for February. The general fund-flows trend for the 10 best-selling funds was somewhat 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 (+€6.6 bn), followed by equity funds (+€4.7 bn) and mixed-assets funds (+€0.6 bn).

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

Source: Refinitiv Lipper

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

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