February 22, 2021

Monday Morning Memo: European Fund Flow Trends, January 2021

by Detlef Glow.

Despite the deteriorating situation with regard to the COVID-19 pandemic, January 2021 was another positive month for the European fund industry since the promoters of mutual funds (+€52.3 bn) and ETFs (+€15.2 bn) enjoyed inflows. Despite some economic uncertainties’ investors bought into risky assets. As a result, long-term funds enjoyed estimated net inflows of €78.4 bn, while money market products had estimated net outflows of €11.0 bn.

Equity funds (+€51.6 bn) were by far the best-selling asset type overall for January 2021. The category was followed by bond funds (+€27.7 bn), mixed-assets funds (+€2.8 bn), and commodities funds (+€1.2 bn). On the other side of the coin, money market funds (-€11.0 bn) faced the highest outflows for the month, bettered by alternative UCITS funds (-€4.8 bn), “other” funds (-€0.1 bn), and real estate funds (-€0.02 bn).

Graph 1: Estimated Net Flows by Asset and Product Type – January 2021 (in bn EUR)

Review of the European Fund Flows, January 2021

Source: Refinitiv Lipper

The trend toward passive investment vehicles has been widely discussed by market observers and asset managers, so it is worthwhile to highlight this topic—especially as not all passive products are ETFs. In fact, the flows into ETFs (+€15.2 bn) were outpacing the flows into passive index mutual funds (€6.7 bn) for January 2021.

More generally, there was no evidence that passive funds have overtaken actively managed funds, as the majority (€45.6 bn, or 67.57%) of the overall fund flows for January were invested in actively managed products. Meanwhile, €21.9 bn, or 32.43%, were invested in passive products.

Graph 2: Market Share of the Estimated Net Flows by Management Approach (January 1 – January 31, 2021)

Source: Refinitiv Lipper

Money Market Products

As the current market environment is still somewhat fragile, it was somewhat surprising that European investors pulled money out of money market products. As a result, money market funds were the asset type with the highest outflows for the month (-€11.0bn). In line with their active peers, ETFs investing in money market instruments contributed estimated net outflows of €0.3 bn to the total.

Money Market Products by Sector

In more detail, Money Market EUR (+€5.0 bn) was the best seller within the money market segment and the third best-selling Lipper classification overall, followed by Money Market Global (+€0.4 bn) and Money Market NOK (+€0.1 bn). At the other end of the spectrum, Money Market GBP (-€11.0 bn) suffered the highest net outflows overall, bettered by Money Market USD (-€0.4 bn) and Money Market AUD (-€1.2 bn).

This flow pattern revealed that European investors sold money market products in foreign currencies and bought further back into the euro. Taking the strong inflows in money market products over the course of the year 2020 into account, the flow pattern in January 2021 may mark the beginning of a period during which the large money market positions that were built in 2020 are reinvested into long-term funds. In conjunction with the asset allocation decisions of portfolio managers, these shifts in the money market segment 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.

Fund Flows by Lipper Global Classifications

With regard to the overall sales for January, it was not surprising that Equity Global (+€20.9 bn) dominated the table of the 10 best-selling peer groups by estimated net flows for January since funds from this classification have been somewhat in favor with European investors for a while now. It was followed by Equity Sector Information Technology (+€5.0 bn), Money Market EUR (+€5.0 bn), Equity China (+€4.7 bn), and Bond Global Short Term (+€4.6 bn).

Graph 3: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, January 2021 (Euro Billions)

Review of the European Fund Flows, January 2021

Source: Refinitiv Lipper

On the other side of the table, Money Market GBP (-€11.0 bn) faced the highest estimated net outflows for January, bettered by Absolute Return Bond EUR (-€4.8 bn) and Money Market USD (-€4.0 bn).

A closer look at the best and worst selling Lipper Global Classifications for January shows that European investors were returning to a risk-on mode and sold so-called safe-haven investments such as money market products in foreign currencies. In more detail, European investors took positions in sectors that may offer diversification for their portfolio such as global equities to profit, or at least blunt losses from, the coronavirus pandemic. There was also a trend toward low carbon emissions like the industry sector information technology or the theme of alternative energy.

Fund Flows by Fund Domiciles

Single-fund domicile flows (including those to money market products) showed, in general, a positive picture during January. Twenty-four of the 34 markets covered in this report showed estimated net inflows, and 10 showed net outflows. Luxembourg (+€34.0 bn) was the fund domicile with the highest net inflows, followed by France (+€15.3 bn), Switzerland (+€6.4 bn), the U.K. (+€5.8 bn), and Ireland (+€3.7 bn). On the other side of the table, the Netherlands (-€2.1 bn) was the fund domicile with the highest outflows, bettered by Germany (-€1.5 bn) and Italy (-€1.1 bn). It is noteworthy that the fund flows for France were impacted by flows in the money market segment (+€17.7 bn).

Graph 4: Estimated Net Sales by Fund Domiciles, January 2021 (Euro Billions)

Source: Refinitiv Lipper

Within the bond sector, funds domiciled in Luxembourg (+€8.5 bn) led the table, followed by Ireland (+€6.0 bn), France (+€4.6 bn), Switzerland (+€3.1 bn), and the Netherlands (+€2.7 bn). Bond funds domiciled in Germany (-€1.0 bn), Italy (-€0.3 bn), and Norway (-€0.3 bn) were at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€32.2 bn) led the table, followed by Ireland (+€15.3 bn), the U.K. (+€2.3 bn), Switzerland (+€1.3 bn), and Sweden (+€1.3 bn). Meanwhile, the Netherlands (-€2.2 bn), France (-€1.0 bn), and Germany (-€0.2 bn) were the domiciles with the highest estimated net outflows from equity funds.

Regarding mixed-assets products, the U.K. (+€2.1 bn) was the domicile with the highest estimated net inflows for January, followed by Switzerland (+€1.2 bn), Belgium (+€0.9 bn), Ireland (+€0.5 bn), and Spain (+€0.4 bn). In contrast, the Netherlands (-€1.0 bn), Luxembourg (-€0.7 bn), and France (-€0.4 bn) were the domiciles with the highest estimated net outflows from mixed-assets funds.

Ireland (+€1.0 bn) was the domicile with the highest estimated net inflows into alternative UCITS funds for January, followed by Luxembourg (+€0.9 bn) and Denmark (+€0.02 bn). Meanwhile, France (-€5.7 bn), Italy (-€0.4 bn), and the U.K. (-€0.3 bn) were at the other end of the table.

Fund Flows by Promoters

UBS (+€7.5 bn) was the best-selling fund promoter in Europe for January, ahead of BlackRock (+€5.7 bn), AXA (+€5.0 bn), Credit Mutuel (+€4.3 bn), and Zwitser Levenn (+€3.9 bn). Given the product ranges of the top 10 promoters and the overall fund flow trends, it was surprising to see that ETFs only played a major role for BlackRock in terms of fund distribution success despite the fact that four out of the 10 best-selling fund promoters in Europe were offering ETFs. In addition, it is noteworthy that the inflows for Credit Mutuel (+€4.1 bn) and AXA (+€2.7 bn) were impacted by inflows in money market funds.

Graph 5: Ten Best-Selling Fund Promoters in Europe, January 2021 (Euro Billions)

Review of the European Fund Flows, January 2021Review of the European Fund Flows, January 2021

Source: Refinitiv Lipper

Considering the single-asset classes, Amundi (+€4.4 bn) was the best-selling promoter of bond funds, followed by BlackRock (+€3.6 bn), ZwitserLevenn (+€2.6 bn), UBS (+€2.5 bn), and AXA (+€1.7 bn).

Within the equity space, BlackRock (+€12.4 bn) led the table, followed by UBS (+€3.8 bn), JPMorgan (+€3.6 bn), Allianz (+€2.5 bn), and Amundi (+€2.4 bn).

Tikehau Investment Management (+€1.0 bn) was the leading promoter of mixed-assets funds in Europe, followed by Aviva (+€0.6 bn), Vanguard Group (+€0.6 bn), PIMCO (+€0.5 bn), and AXA (+€0.5 bn).

Mercer (+€0.4 bn) was the leading promoter of alternative UCITS funds for the month, followed by Credit Suisse Group (+€0.4 bn), JPMorgan (+€0.3 bn), Jupiter (+€0.2 bn), and Nordea (+€0.2 bn).

Refinitiv Lipper delivers data on more than 330,000 collective investments in 113 countries. Find out more.

The views expressed are the views of the author and not necessarily those of Refinitiv. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.

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