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May 22, 2023

Monday Morning Memo: European Fund Flow Trends Report, April 2023

by Detlef Glow.

It was not surprising that April 2023 was in general a positive month for the European fund industry given the rather positive revisions of the economic outlooks for the major economies globally and a possible end of the interest hiking cycle of central banks in the near future. That said, mutual fund promoters (+€5.0 bn) and ETFs promoters (+€11.0 bn) enjoyed inflows over the course of the month. The inflows into actively managed funds were driven by inflows into money market products (+€10.0 bn). Within the current market environment, it is not surprising that European investors bought money market products, since the Eurozone has an inverted yield curve, which means that money market products offer a higher yield than medium or long-term bonds. More general, long-term funds (+€5.5 bn), and money market products (+€11.0 bn) enjoyed inflows for the month. These flow numbers might be seen as a sign that European investors are somewhat in risk-on mode.

 

Asset Type Flows April 2023

In more detail, money market funds (+€11.0 bn) were the best-selling asset type overall for April 2023. The category was followed by bond funds (+€8.6 bn), while all other asset types faced outflows, commodities funds (-€0.2 bn), real estate funds (-€0.2 bn), “other” funds (-€0.4 bn), equity funds (-€1.4 bn), alternative UCITS funds (-€2.5 bn), and mixed-assets funds (-€4.4 bn).

Graph 1: Estimated Net Flows by Asset and Product Type – April 2023 (in bn EUR)

European Fund Flow Trends, April 2023

Source: LSEG Lipper

 

Asset Type Flows Year to Date

The flow pattern for April drove the estimated overall net flows to €49.4 bn year to date.

While mutual funds (-€1.2 bn) faced estimated net outflows, ETFs enjoyed inflows of €50.6 bn over the course of the first four months of 2023. The inflows into ETFs within the positive but still somewhat uncertain market environment repeat a trend we witnessed over other rough market periods such as the financial crisis or the euro crisis, where ETFs enjoyed inflows while mutual funds faced massive outflows.

Despite the inverted yield curve for Eurozone bonds, European investors bought further into bond funds, which might be seen as a sign that European investors may anticipate a possible ending of the interest hiking cycle of central banks around the globe led by the U.S. Federal Reserve.

As mentioned before, European investors seem to be in risk-on mode as money market funds (+€10.6 bn) and long-term investment products (+€38.8 bn) enjoyed inflows for the year so far.

 

Taking a closer look, bond funds (+€63.7 bn) were the asset type with the highest estimated net inflows overall for 2023 so far. It is followed by equity funds (+€21.3 bn) and money market funds (+€10.6 bn), as well as “other” funds (+€1.0 bn) and real estate funds (+€0.5 bn). Conversely, commodities funds (-€0.7 bn), alternative UCITS funds (-€15.6 bn), and mixed-assets funds (-€31.4 bn) faced outflows for the year to date.

Graph 2: Estimated Net Sales by Asset and Product Type, January 1 – April 30, 2023 (Euro Billions)

European Fund Flow Trends, April 2023

Source: LSEG Lipper

The trend toward passive investment vehicles is 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 (+€50.6 bn) were outpacing the flows into passively managed index mutual funds (€15.2 bn) for the first four months of 2023.

Graph 3: Estimated Net Flows by Management Approach and Product Type (January 1 – April 30, 2023)

European Fund Flow Trends, April 2023

Source: LSEG Lipper

 

Fund Flows by Lipper Global Classifications, April 2023

When it comes to the overall sales for April, it was not surprising that Money Market EUR (+€27.8 bn) dominated the table of the 10 best-selling peer groups by estimated net flows for April since money market funds enjoyed the highest inflows for the month. It was followed by Equity Global (+€5.4 bn), Target Maturity Bond 2020+ (+€3.8 bn), Bond Global EUR (+€1.9 bn), and Bond EMU Government (+€1.9 bn).

Graph 4: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, April 2023 (Euro Millions)

European Fund Flow Trends, April 2023

Source: LSEG Lipper

On the other side of the table, Money Market GBP (-€17.5 bn) faced the highest estimated net outflows for April, bettered by Mixed Asset EUR Flexible – Global (-€2.7 bn) and Equity France (-€1.7 bn).

A closer look at the best- and worst-selling Lipper Global Classifications for April shows that European investors were somewhat in risk-on mode over the course of the month. In more detail, European investors increased their positions in money market products and took also positions in somewhat riskier sectors, such as Equity Emerging Markets Global and Bond Global Corporates USD and Bond EUR Corporates.

 

Fund Flows by Lipper Global Classifications, Year to Date

A closer look at the best- and worst-selling Lipper Global Classifications for the first four months of 2023 shows that European investors are in risk-on mode, despite the fact that money market EUR dominated the table of the best-selling Lipper Global Classifications.

As graph 2 shows, mixed-assets products faced the highest outflows over the course of the year 2023 so far, while bond products enjoyed the highest inflows. Given the overall trend it was not surprising that the table of the best-selling Lipper Global Classifications year to date was split between bond and equity peer groups, with two money market categories joining the table of the 10 best-selling Lipper global classifications. Money Market EUR (+€30.5 bn) was the best-selling peer group for the year so far. It was followed by Equity Global (+€23.1 bn), Target Maturity Bond 2020+ (+€21.1 bn), Money Market USD (+€20.8 bn), and Equity Emerging Markets Global (+€14.8 bn).

Graph 5: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, January 1 – April 30, 2023 (Euro Billions)

Source: LSEG Lipper

Given the current market environment it was surprising to see so many mixed-assets classifications at the opposite side of the table. Money Market GBP (-€46.4 bn) faced the highest outflows for the year so far. It was bettered by Mixed Asset GBP Balanced (-€13.9 bn), Mixed Asset EUR Flexible – Global (-€9.6 bn), Equity US (-€8.4 bn), and Bond EUR Short Term (-€7.4 bn).

It is noteworthy that the estimated flows in money market sectors are not only a reflection of asset allocation decisions of investors since these products are also used by corporates as a replacement for cash accounts. In addition, one needs to bear in mind that the yield curves in the Eurozone and other parts of the world are currently inverted, which means that money market instruments offer a higher yield than medium or long-term bonds.

 

Fund Flows by Promoters, April 2023

BNP Paribas (+€6.5 bn) was the best-selling fund promoter in Europe for April, ahead of AXA (+€4.9 bn), Vanguard (+€3.6 bn), Goldman Sachs (+€3.4 bn), and Ostrum Asset Management (+€3.3 bn). Given the product ranges of the 10-top promoters and the overall fund flow trends, it was surprising to see that ETFs didn’t play a more significant role for the positions of the leading ETF promoter in Europe.

Graph 6: Ten Best-Selling Fund Promoters in Europe, April 2023 (Euro Millions)

European Fund Flow Trends, April 2023

Source: LSEG Lipper

 

Fund Flows by Promoters, Year to Date

The largest fund promoter in Europe, BlackRock, (+€22.8 bn) is the best-selling fund promoter in Europe over the course of the year so far, ahead of BNP Paribas (+€16.9 bn), JPMorgan (+€15.6 bn), Vanguard (+€11.5 bn), and Swisscanto (+€10.3 bn).

By looking at these numbers, one needs to bear in mind that the flows in the money market segment over the course of 2023 so far have a significant impact on the flow numbers and positions in the league table of the best-selling fund promoters in Europe.

Graph 7: Ten Best-Selling Fund Promoters in Europe, January 1 – April 30, 2023 (Euro Billions)

Source: LSEG Lipper

 

This article is for information purposes only and does not constitute any investment advice.

 

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

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