September 26, 2022

Monday Morning Memo: European Fund Flow Trends, August 2022

by Detlef Glow.

Given the general market environment over the course of August 2022, it was not surprising that the European fund industry faced outflows over the course of the month. That said, one needs to bear in mind that the geopolitical situation in Europe, the still ongoing COVID-19 pandemic, disrupted delivery chains, an increasing inflation, and increasing interest rates are impacting the expectations of investors. The promoters of mutual funds (-€12.3 bn) faced outflows while the promoters of ETFs (+€1.1 bn) enjoyed inflows.

With regard to the accelerating rise of inflation rates and various other economic uncertainties, it is not surprising that European investors sold equity funds. In more detail, money market products (+€5.8 bn) enjoyed outflows while long-term funds (-€16.8 bn) faced outflows over the course of August 2022.

At a closer look, money market funds (+€5.8 bn) were the best-selling asset type over the course of August 2022. They were followed by bond funds (+€3.4 bn), real estate funds (+€1.6 bn), alternative UCITS funds (+€0.9 bn), and mixed-assets funds (+€0.7 bn). On the other side of the table, equity funds (-€22.0 bn), were the asset type with the highest outflows for August, bettered by commodities funds (-€1.0 bn) and “other” funds (-€0.4 bn).

Graph 1: Estimated Net Flows by Asset and Product Type – August 2022 (in bn EUR)

Review of the Fund Flows in Europe, August 2022

Source: Refinitiv Lipper

The flow pattern for August drove the estimated overall net redemptions to €225.1 bn year to date.

 

Money Market Products

With a market share of 10.55% of the overall assets under management in the European fund management industry, money market products are the fourth largest asset type. Therefore, it is worth briefly reviewing the trends in this market segment. Given the current geopolitical situation and increasing inflation rates which may require further actions from central banks and governments around the globe, it was not surprising that European investors slightly increased their money market positions (+€5.8 bn) over the course of August. This is because money market products are considered safe-haven investments. In contrast with their active peers (+€5.9 bn), ETFs investing in money market instruments contributed estimated net outflows of €0.1 bn to the total.

Money Market Products by Lipper Global Classification

In more detail, Money Market USD (+€15.4 bn) was the best seller within the money market segment, followed by Money Market EUR Leveraged (+€0.8 bn) and Money Market Global (+€0.8 bn). At the other end of the spectrum, Money Market GBP (-€8.3 bn) suffered the highest net outflows in the money market segment, bettered by Money Market EUR (-€3.5 bn) and Money Market NOK (-€0.04 bn).

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.

Graph 2: Estimated Net Flows in Money Market Products by LGC – August 2022 (Euro Billions)

Source: Refinitiv Lipper

 

Fund Flows by Lipper Global Classifications

When it comes to the overall sales for August, it was somewhat surprising that only bond and money market classifications were within the 10 best-selling peer groups by estimated net inflows for August. Money Market USD (+€15.4 bn) was the best-selling Lipper Global Classification for the month. It was followed by Bond Global USD (+€3.5 bn), Bond USD Government (+€2.8 bn), Bond EUR Corporates (+€1.8 bn), and Bond Emerging Markets Global HC (+€1.4 bn).

Graph 3: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, August 2022 (Euro Millions)

Review of the Fund Flows in Europe, August 2022

Source: Refinitiv Lipper

On the other side of the table, Money Market GBP (-€8.3 bn) faced the highest estimated net outflows for August. It was bettered by Equity US (-€6.7 bn) and Money Market EUR (-€3.5 bn).

A closer look at the best- and worst-selling Lipper Global Classifications for August shows that European investors were somewhat readjusting their asset allocation. The trend of European investors selling equity funds investing in Europe continued over the course of August. The flows for August 2022 might be a sign that European investors try to protect their portfolios against the possible outcome from the current economic environment and the measures taken by central banks around the globe to fight increasing inflation rates.

 

Fund Flows by Promoters

Morgan Stanley (+€8.0 bn) was the best-selling fund promoter in Europe for August, ahead of HSBC (+€3.6 bn), Credit Mutuel (+€3.0 bn), Natixis (+€2.9 bn), and Groupama (+€1.7 bn). Given the product ranges of the 10-top promoters and the overall fund flow trends, it was surprising to see that ETFs played only a minor role for the largest fund promoters in Europe within the list of the 10 best-selling fund promoters.

With regards to the overall estimated net flows, it is noteworthy that the inflows for Morgan Stanley (+€8.0 bn), Credit Mutuel (+€3.1 bn), Natixis (+€2.7 bn), and HSBC (+€2.3 bn) were impacted by inflows into money market products.

Graph 4: Ten Best-Selling Fund Promoters in Europe, August 2022 (Euro Millions)

Source: Refinitiv Lipper

Considering the single-asset classes, KBC (+€1.2 bn) was the best-selling promoter of bond funds, followed by HSBC (+€1.1 bn), JPMorgan (+€1.0 bn), Lumyna (+€0.9 bn), and Vanguard (+€0.8 bn).

Within the equity space, UBS (+€3.3 bn) led the table, followed by Fidelity International (+€0.7 bn), Deka (+€0.7 bn), Union Investment (+€0.5 bn), and Mediolanum (+€0.4 bn).

True Potential (+€0.5 bn) was the leading promoter of mixed-assets funds in Europe, followed by Allianz (+€0.4 bn), Wesleyan (+€0.4 bn), AXA (+€0.3 bn), and Vanguard (+€0.2 bn).

Columbia Threadneedle (+€0.5 bn) was the leading promoter of alternative UCITS funds for the month, followed by Neuberger Berman (+€0.3 bn), Pimco (+€0.3 bn), DWS Group (+€0.3 bn), and Amundi (+€0.2 bn).

 

Fund Flows by Fund Domiciles

Single-fund domicile flows (including those to money market products) showed, in general, a positive picture during August. Twenty-five of the 35 markets covered in this report showed estimated net inflows, and 10 showed net outflows. France (+€8.7 bn) was the fund domicile with the highest net inflows, followed by Switzerland (+€3.9 bn), the Netherlands (+€0.8 bn), Hungary (+€0.4 bn), and the Czech Republic (+€0.3 bn). On the other side of the table, Luxembourg (-€9.4 bn) was the fund domicile with the highest outflows, bettered by Ireland (-€7.3 bn) and the UK (-€7.1 bn).

It is noteworthy that the estimated net flows for France (+€10.2 bn), Switzerland (+€1.3 bn), Hungary (+€0.1 bn), and Ireland (-€6.9 bn) were impacted by the flows in money market products.

Graph 5: Estimated Net Sales by Fund Domiciles, August 2022 (Euro Billions)

Source: Refinitiv Lipper

Within the bond sector, funds domiciled in Ireland (+€4.7 bn) led the table, followed by Denmark (+€0.8 bn) and Finland (+€0.8 bn). Bond funds domiciled in the UK (-€2.5 bn), Luxembourg (-€2.5 bn), and Italy (-€0.3 bn) were at the other end of the table.

For equity funds, products domiciled in Switzerland (+€0.6 bn) led the table for the month, followed by Germany (+€0.3 bn), the Netherlands (+€0.3 bn), Austria (+€0.1 bn), and Norway (+€0.1 bn). Meanwhile, Luxembourg (-€8.9 bn), the UK (-€6.1 bn), and Ireland (-€4.4 bn) were the domiciles with the highest estimated net outflows from equity funds.

Regarding mixed-assets products, the UK (+€0.8 bn) was the domicile with the highest estimated net inflows, followed by Belgium (+€0.6 bn), Switzerland (+€0.5 bn), Luxembourg (+€0.5 bn), and Finland (+€0.2 bn). In contrast, Ireland (-€0.6 bn), Italy (-€0.6 bn), and Sweden (-€0.3 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 the month, followed by the UK (+€0.2 bn) and Germany (+€0.2 bn). Meanwhile, Italy (-€0.1 bn), Spain (-€0.1 bn), and Luxembourg (-€0.04 bn) were at the other end of the table.

 

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

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