Given the general market environment over the course of September 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. In addition to this the market turmoil in the UK, the announcement of the so-called mini-budget at the end of September might have also contributed to the overall outflows from mutual funds and ETFs. The promoters of mutual funds (-€107.3 bn) and ETFs (-€3.9 bn) faced outflows.
With regard to the accelerating rise of inflation rates and various other economic uncertainties, it is not surprising that European investors sold bond and equity funds. In more detail, short-term (money market) products (-€26.8 bn) and long-term funds (-€84.4 bn) faced outflows over the course of September 2022.
At a closer look, real estate funds (+€2.6 bn) were the only asset type which enjoyed inflows over the course of September 2022. On the other side of the table, commodities funds (-€0.8 bn), ”other” funds (-€1.7 bn), mixed-assets funds (-€6.7 bn), alternative UCITS funds (-€13.6 bn), money market funds (-€26.8 bn), equity funds (-€31.2 bn), and bond funds (-€33.0 bn) experienced outflows.
Graph 1: Estimated Net Flows by Asset and Product Type – September 2022 (in bn EUR)
Source: Refinitiv Lipper
Money Market Products
With a market share of 11.01% 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 surprising that European investors decreased their money market positions (-€26.8 bn) over the course of September since money market products are considered safe-haven investments. In contrast with their active peers (-€27.2 bn), ETFs investing in money market instruments contributed estimated net inflows of €0.4 bn to the total.
Money Market Products by Lipper Global Classification
In more detail, Money Market Global (+€0.6 bn) was the best seller within the money market segment, followed by Money Market CHF (+€0.6 bn) and Money Market HUF (+€0.2 bn). At the other end of the spectrum, Money Market USD (-€12.6 bn) suffered the highest net outflows in the money market segment, bettered by Money Market EUR (-€11.5 bn) and Money Market GBP (-€3.6 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 – September 2022 (Euro Billions)
Source: Refinitiv Lipper
Fund Flows by Lipper Global Classifications
When it comes to the overall sales for September, it was somewhat surprising that bond classifications were dominating the table of the 10 best-selling peer groups by estimated net inflows for September. Bond USD (+€3.4 bn) was the best-selling Lipper Global Classification for the month. It was followed by Target Maturity Bond EUR 2020+ (+€2.5 bn), Real Estate Switzerland (+€2.2 bn), Bond GBP Government (+€1.7 bn), and Bond USD Government (+€1.4 bn).
The inflows in Bond GBP Government and Bond GBP Inflation Linked (+€1.0 bn) might be a sign that European investors bought GBP dominated bonds after the strong loses of these bonds during the fire sale from pension funds after the announcement of the so-called mini budget of the new UK government at the end of September. With regard to this, it is noteworthy that the flows into these two classifications have not offset the outflows from money market GBP.
Graph 3: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, September 2022 (Euro Millions)
Source: Refinitiv Lipper
On the other side of the table, Money Market USD (-€12.6 bn) faced the highest estimated net outflows for September. It was bettered by Money Market EUR (-€11.5 bn) and Bond Global EUR (-€8.7 bn).
A closer look at the best- and worst-selling Lipper Global Classifications for September shows that European investors were somewhat readjusting their asset allocation. The trend that European investors selling equity funds investing in Europe continued over the course of September, even as the respective peer groups were not on the table of the 10 Lipper Global Classifications with the highest outflows. The flows for September 2022 might be a sign that European investors are readjusting their portfolios and 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
Goldman Sachs (+€3.1 bn) was the best-selling fund promoter in Europe for September, ahead of HSBC (+€2.5 bn), Pictet (+€2.0 bn), KBC (+€1.8 bn), and La Caixa (+€1.6 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 fund promoters on the list of the 10 best-selling fund promoters.
Graph 4: Ten Best-Selling Fund Promoters in Europe, September 2022 (Euro Millions)
Source: Refinitiv Lipper
Considering the single-asset classes, La Caixa (+€1.9 bn) was the best-selling promoter of bond funds, followed by UBS (+€1.7 bn), KBC (+€0.6 bn), Mercer (+€0.5 bn), and BBVA (+€0.4 bn).
Within the equity space, HSBC (+€1.1 bn) led the table, followed by Swedbank (+€0.6 bn), JPMorgan (+€0.5 bn), KBC (+€0.5 bn), and BankInvest (+€0.5 bn).
KBC (+€1.7 bn) was the leading promoter of mixed-assets funds in Europe, followed by Mercer (+€0.6 bn), Allianz (+€0.4 bn), True Potential (+€0.4 bn), and NN Investment Partners (+€0.2 bn).
Honeycomb (+€0.3 bn) was the leading promoter of alternative UCITS funds for the month, followed by DNCA Investments (+€0.2 bn), Gresham House (+€0.2 bn), Mapfre (+€0.2 bn), and Brevan Howard (+€0.1 bn).
Fund Flows by Fund Domiciles
Single-fund domicile flows (including those to money market products) showed, in general, a positive picture during September. Twenty-one of the 35 markets covered in this report showed estimated net inflows, and 14 showed net outflows. Switzerland (+€4.0 bn) was the fund domicile with the highest net inflows, followed by Spain (+€1.3 bn), Belgium (+€1.3 bn), the Netherlands (+€0.9 bn), and Hungary (+€0.5 bn). On the other side of the table, Luxembourg (-€43.5 bn) was the fund domicile with the highest outflows, bettered by Ireland (-€36.6 bn) and France (-€16.4 bn).
It is noteworthy that the estimated net flows for Switzerland (+€1.0 bn), Hungary (+€0.2 bn), France (-€12.9 bn), Luxembourg (-€9.0 bn), and Ireland (-€4.2 bn) were impacted by the flows in money market products.
Graph 5: Estimated Net Sales by Fund Domiciles, September 2022 (Euro Billions)
Source: Refinitiv Lipper
Within the bond sector, funds domiciled in Spain (+€2.3 bn) led the table, followed by Hungary (+€0.5 bn) and the Netherlands (+€0.4 bn). Bond funds domiciled in Ireland (-€16.5 bn), Luxembourg (-€15.4 bn), and Germany (-€1.3 bn) were at the other end of the table.
For equity funds, products domiciled in Switzerland (+€1.1 bn) led the table for the month, followed by Sweden (+€0.6 bn), Belgium (+€0.4 bn), Austria (+€0.1 bn), and the Netherlands (+€0.1 bn). Meanwhile, Luxembourg (-€11.3 bn), the UK (-€10.5 bn), and Ireland (-€8.6 bn) were the domiciles with the highest estimated net outflows from equity funds.
Regarding mixed-assets products, Belgium (+€1.5 bn) was the domicile with the highest estimated net inflows, followed by the Netherlands (+€0.3 bn), Ireland (+€0.1 bn), Greece (+€0.03 bn), and Slovakia (+€0.01 bn). In contrast, Luxembourg (-€3.0 bn), the UK (-€1.3 bn), and Italy (-€1.3 bn) were the domiciles with the highest estimated net outflows from mixed-assets funds.
Spain (+€0.2 bn) was the domicile with the highest estimated net inflows into alternative UCITS funds for the month, followed by the Netherlands (+€0.1 bn) and the Isle of Man (+€0.1 bn). Meanwhile, Ireland (-€6.5 bn), Luxembourg (-€4.6 bn), and the UK (-€2.0 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.
