June 22, 2020

Monday Morning Memo: European Fund-Flows Trends, May 2020

by Detlef Glow.

European investors bought further back into mutual funds and ETFs in May after massive outflows from these products in March. Investors returned to the markets after they had somewhat stabilized after the massive stimulus packages by central banks and governments globally following the outbreak of COVID-19, which caused widespread worldwide lockdowns and stoked fears of a global recession.

As a result, long-term mutual funds posted overall net inflows for the month. Bond funds (+€29.6 bn) were the best-selling long-term asset type for May, followed by equity funds (+€7.9 bn), mixed-assets funds (+€5.7 bn), commodities funds (+€2.4 bn), ”other” funds (+€0.7 bn), and real estate funds (+€0.6 bn). On the other hand, alternative UCITS funds (-€6.0 bn) were again the only asset type with net outflows from long-term mutual funds.

These fund flows added up to overall estimated net inflows of €40.9 bn into long-term investment funds for May. ETFs contributed inflows of €5.3 bn to these flows.

Money Market Products

Since the current market environment is still somewhat fragile, European investors bought more money market products. As a result, money market funds faced estimated net inflows of €28.2 bn. In contrast to their actively managed peers, ETFs investing in money market instruments contributed estimated net outflows of €0.4 bn to the total.

This flow pattern led to estimated overall net inflows of €69.1 bn for May and overall estimated inflows of €3.9 bn year to date.

Money Market Products by Sector

Money Market USD (+€22.7 bn) was the best-selling fund sector overall and was also the best seller within the money market segment, followed by Money Market GBP (+€9.8 bn) and Money Market NOK (+€0.2 bn). At the other end of the spectrum, Money Market EUR (-€4.2 bn) suffered the highest net outflows in the money market segment, bettered by Money Market CHF (-€0.2 bn) and Money Market SEK (-€0.1 bn).

Comparing this flow pattern with the flow pattern for February revealed that European investors further built up their positions in the U.S. dollar and the pound sterling while selling the euro. 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, May 2020 (Euro Billions)

European fund flows, May 2020

Source: Refinitiv Lipper

Fund Flows by Sectors

Equity Global (+€6.2 bn) was the best-selling sector in the segment of long-term mutual funds, followed by Bond Global Corporates USD (+€4.4 bn). Bond EUR Corporates (+€4.4 bn) was the third best-selling long-term sector, followed by Bond USD High Yield (+€4.0 bn) and Bond Global USD (+€3.9 bn).

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

Source: Refinitiv Lipper

At the other end of the spectrum, Absolute Return Bond EUR (-€3.0 bn) suffered the highest net outflows in the segment of long-term funds, bettered by Equity Emerging Markets Global (-€2.9 bn), Bond Convertibles Global (-€1.8 bn), Equity Europe (-€1.7 bn), and Bond Emerging Markets Global LC (-€1.6 bn).

Graph 3: Ten Bottom Sectors, May 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 May. Nineteen of the 34 markets covered in this report showed estimated net inflows, and 15 showed net outflows. Ireland (+€30.8 bn) was the fund domicile with the highest net inflows, followed by Luxembourg (+€26.3 bn), the U.K. (+€5.6 bn), Switzerland (+€3.4 bn), and Germany (+€2.7 bn). On the other side of the table, France (-€2.2 bn) was the fund domicile with the highest outflows, bettered by the Netherlands (-€0.6 bn) and Italy (-€0.5 bn). It is noteworthy that the fund flows for Ireland (+€16.6 bn), Luxembourg (+€11.4 bn), and France (-€1.0 bn) were impacted by flows in the money market segment.

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

European fund flows, May 2020 

Source: Refinitiv Lipper

Within the bond sector, funds domiciled in Ireland (+€13.4 bn) led the table, followed by Luxembourg (+€10.1 bn), Switzerland (+€1.6 bn), France (+€1.6 bn), and the U.K. (+€1.3 bn). Bond funds domiciled in Belgium (-€0.2 bn), Denmark (-€0.1 bn), and the Netherlands (-€0.1 bn) were at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€4.0 bn) led the table, followed by the U.K. (+€2.0 bn), Sweden (+€1.7 bn), Germany (+€1.6 bn), and Belgium (+€0.9 bn). Meanwhile, Ireland (-€1.3 bn), the Netherlands (-€0.6 bn), and Spain (-€0.5 bn) were the domiciles with the highest estimated net outflows from equity funds.

Regarding mixed-assets products, Luxembourg (+€2.0 bn) was the domicile with the highest estimated net inflows for May, followed by the U.K. (+€1.3 bn), Germany (+€0.7 bn), Belgium (+€0.6 bn), and Austria (+€0.3 bn). In contrast, Guernsey (-€0.1 bn), Spain (-€0.1 bn), and Italy (-€0.01 bn) were the domiciles with the highest estimated net outflows from mixed-assets funds.

Isle of Man (+€0.1 bn) was the domicile with the highest estimated net inflows into alternative UCITS funds for May, followed by Hungary (+€0.03 bn), Denmark (+€0.02 bn), Liechtenstein (+€0.01 bn), and the Netherlands (+€0.01 bn). Meanwhile, France (-€2.9 bn), Luxembourg (-€1.2 bn), and Italy (-€0.5 bn) were at the other end of the table.

Fund Flows by Promoters

JP Morgan was the best-selling fund promoter for May overall, with net sales of €16.8 bn, ahead of BlackRock (+€13.7 bn) and Morgan Stanley (+€4.2 bn). It is noteworthy that the inflows of JP Morgan (+€13.3 bn), BlackRock (+€7.3 bn), and Morgan Stanley (+€2.1bn) were impacted by flows into money market funds.

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

European fund flows, May 2020

Source: Refinitiv Lipper

Considering the single-asset classes, BlackRock (+€5.1 bn) was the best-selling promoter of bond funds, followed by PIMCO (+€4.0 bn), Amundi (+€2.7 bn), JP Morgan (+€2.6 bn), and Aviva (+€1.7 bn).

Within the equity space, Morgan Stanley (+€1.9 bn) led the table, followed by Eurizon Capital (+€1.3 bn), KBC (+€0.9 bn), UBS (+€0.9 bn), and JP Morgan (+€0.8 bn).

Eurizon Capital (+€1.4 bn) was the leading promoter of mixed-assets funds in Europe, followed by Flossbach von Storch (+€0.8 bn), DWS Group (+€0.7 bn), Union Investment (+€0.5 bn), and Vanguard Group (+€0.4 bn).

GLG Partners (+€0.3 bn) was the leading promoter of alternative UCITS funds for the month, followed by Candriam (+€0.2 bn), Jupiter (+€0.2 bn), Ninety One (+€0.2 bn), and JP Morgan (+€0.1 bn).

Best-Selling Funds

The 10 best-selling long-term funds, gathered at the share class level, experienced net inflows of €8.7 bn for May. 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 (+€4.5 bn), followed by equity funds (+€3.6 bn) and mixed-assets funds (+€0.6 bn). QSF – Global Macro Bond I Acc (+$1.6 bn), was the best-selling fund share class for May.

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

Source: Refinitiv Lipper

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