Assets Under Management in the European Fund Industry
The assets under management within the European fund industry increased within the volatile but positive market environment over the course of Q1 2023. Therefore, it is no surprise that assets under management for all product types with the exception of real estate funds have increased. In more detail, the assets under management in the European fund industry increased from €13,313.1 bn as of December 31, 2022, to €13,809.3 bn at the end of March 2023.
Graph 1: Assets Under Management in the European Fund Industry, January 1, 2002 – March 31, 2023
Source: Refinitiv Lipper
The majority of assets under management were held by actively managed mutual funds (€10,975.8 bn), followed by index tracking mutual funds (€2,833.6 bn) and exchange traded funds (ETFs) (€1,336.0 bn).
In more detail, equity products (€5,699.7 bn) held the majority of assets, followed by bond products (€3,055.5 bn), mixed-assets products (€2,420.9 bn), money market products (€1,605.2 bn), alternatives products (€584.8 bn), real estate products (€298.1 bn), “other” products (€77.9 bn), and commodities products (€67.3 bn).
European Fund Flow Trends Q1 2023
It was not surprising that Q1 2023 was in general a positive period 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.
Nevertheless, mutual funds (-€2.5 bn) faced estimated net outflows, while ETFs enjoyed inflows of €39.6 bn over the course of the first quarter 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.
In more detail, bond funds (+€49.9 bn) were the asset type with the highest estimated net inflows overall for 2023 so far. It is followed by equity funds (+€26.2 bn), ”other” funds (+€1.5 bn), and real estate funds (+€0.6 bn). Conversely, commodities funds (-€0.5 bn), money market funds (-€1.3 bn), alternative UCITS funds (-€13.4 bn), and mixed-assets funds (-€25.7 bn) faced outflows for the year to date.
Graph 2: Estimated Net Sales by Asset and Product Type, January 1 – March 31, 2023 (Euro Billions)
Source: Refinitiv Lipper
This flow pattern drove the estimated overall net flows to €37.1 bn year to date.
Nevertheless, the volatility in the monthly money market flows over the course of the first quarter of 2023 show that European investors are still somewhat unsure about the future directions of the security markets despite the fact that bonds and equities were the best-selling asset types over the first quarter of 2023. That said, the inflows for bond funds seem to be 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.
With regard to the above, European investors seem to be in risk-on mode since money market funds (-€1.3 bn) show overall outflows for the year so far, while long-term investment products enjoyed estimated inflows of €38.4 bn.
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 (+€39.6 bn) were outpacing the flows into passively managed index mutual funds (€10.3 bn) for the first quarter of 2023.
Graph 3: Estimated Net Flows by Management Approach and Product Type (January 1 – March 31, 2023)
Source: Refinitiv Lipper
Money Market Products by Lipper Global Classification
With a market share of 11.47% (March 31, 2023) 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.
Money Market USD (+€22.0 bn) was the best seller within the money market segment, followed by Money Market EUR (+€2.7 bn) and Money Market CHF (+€1.8 bn). At the other end of the spectrum, Money Market GBP (-€29.6 bn) suffered the highest net outflows in the money market segment, bettered by Money Market SEK (-€0.1 bn) and Money Market EUR Leveraged (-€0.04 bn).
With regard to the flow in money market products it is noteworthy that these flows are impacted by a combination of asset allocation decisions of portfolio managers and corporate actions such as cash dividends or cash payments since money market funds are also used by corporations as replacements for cash accounts.
Graph 4: Estimated Net Flows in Money Market Products by LGC – January 1 – March 31, 2023 (Euro Billions)
Source: Refinitiv Lipper
Despite the high inflows in money market funds globally, the fund flows into these products in Europe seem not to be on a vastly elevated level. The spike in inflows in money market products for October 2022 on graph 5 was driven by the LDI crisis in the U.K. which was caused by increasing interest rates in gilts as a reaction to the announcement of an unfunded tax relief package, the so-called “mini-budget”.
Therefore, the outflows from Money Market GBP over the course of the first quarter of 2023 can be seen as an effect from the LDI crisis as U.K. pension funds may have started to reduce the elevated levels of money market products in their portfolios to gain back market exposure to bonds and equities.
Graph 5: Estimated Monthly Net Flows in Money Market Products by LGC – January 1, 2001 – March 31, 2023 (Euro Billions)
Source: Refinitiv Lipper
Fund Flows by Lipper Global Classifications
A closer look at the best- and worst-selling Lipper Global Classifications for the first quarter of 2023 shows that European investors are rather in risk-on mode.
As graph 2 shows, mixed-assets products faced the highest outflows over the course of the first quarter of 2023, 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 one money market category joining the table of the 10 best-selling Lipper global classifications. Money Market USD (+€22.0 bn) was the best-selling peer group for the year so far. It was followed by Equity Global (+€18.2 bn), Target Maturity Bond 2020+ (+€16.0 bn), Equity Emerging Markets Global (+€13.6 bn), and Bond Global USD (+€8.8 bn).
Graph 6: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, January 1 – March 31, 2023 (Euro Billions)
Source: Refinitiv 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 (-€29.6 bn) faced the highest outflows for the year so far. It was bettered by Mixed Asset GBP Balanced (-€15.1 bn), Equity U.S. (-€7.1 bn), Bond EUR Short Term (-€6.8 bn), and Mixed Asset EUR Flexible Global (-€6.8 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.
Fund Flows by Promoters
The largest fund promoter in Europe, BlackRock, (+€21.3 bn) is the best-selling fund promoter in Europe over the course of the first quarter of 2023, ahead of JPMorgan (+€17.6 bn), BNP Paribas (+€10.4 bn), Swisscanto (+€8.7 bn), and Vanguard (+€8.0 bn).
By looking at these numbers, one needs to bear in mind that the flows in the money market segment (JPMorgan +€15.8 bn, BNP Paribas +€10.8 bn) 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 – March 31, 2023 (Euro Billions)
Source: Refinitiv Lipper
Considering the single-asset classes, BlackRock (+€7.7 bn) was the best-selling promoter of bond funds, followed by PIMCO (+€4.1 bn), La Caixa (+€3.9 bn), KBC (+€3.3 bn), and Vanguard (+€3.0 bn).
Within the equity space, BlackRock (+€16.8 bn) led the table, followed by Swisscanto (+€5.5 bn), Vanguard (+€4.2 bn), HSBC (+€2.8 bn), and JPMorgan (+€2.5 bn).
BlackRock (+€2.3 bn) was the leading promoter of mixed-assets funds in Europe, followed by True Potential (+€1.0 bn), Allianz (+€1.0 bn), Kutxabank (+€0.8 bn), and Caja Laboral (+€0.6 bn).
AQR Capital Management (+€0.7 bn) was the leading promoter of alternative UCITS funds for the quarter, followed by Banco Cooperativo (+€0.6 bn), Ruffer (+€0.6 bn), Brevan Howard (+€0.5 bn), and Sabadell (+€0.5 bn).
Fund Flows by Fund Domiciles
Despite the overall outflows in the European fund industry, the single-fund domicile flows (including those to money market products) showed, in general, a positive picture over the course of Q1 2023. Nineteen of the 35 markets covered in this report showed estimated net inflows, and 16 showed net outflows. Switzerland (+€19.3 bn) was the fund domicile with the highest net inflows, followed by Luxembourg (+€15.7 bn), Spain (+€9.4 bn), Germany (+€5.9 bn), and Sweden (+€4.0 bn). On the other side of the table, the U.K. (-€8.1 bn) was the fund domicile with the highest outflows, bettered by Norway (-€7.4 bn) and France (-€5.5 bn).
It is noteworthy that the estimated net flows for Luxembourg (+€17.7 bn), France (+€10.1 bn), Switzerland (+€3.6 bn), and Ireland (-€29.2 bn), were impacted by the flows in money market products.
Graph 8: Estimated Net Sales by Fund Domiciles, Q1 2023 (Euro Billions)
Source: Refinitiv Lipper
Within the bond sector, funds domiciled in Ireland (+18.5 bn) led the table, followed by Spain (+€10.5 bn) and Luxembourg (+€9.0 bn). Bond funds domiciled in Norway (-€4.0 bn), France (-€0.3 bn), and Denmark (-€0.3 bn) were at the other end of the table.
For equity funds, products domiciled in Ireland (+€15.4 bn) led the table for the month, followed by Switzerland (+€10.5 bn) and Luxembourg (+€8.2 bn). Meanwhile, France (-€9.8 bn), the U.K. (-€5.5 bn), and Norway (-€4.3 bn) were the domiciles with the highest estimated net outflows from equity funds.
Regarding mixed-assets products, Switzerland (+€1.6 bn) was the domicile with the highest estimated net inflows for Q1 2023, followed by the Netherlands (+€1.0 bn) and Belgium (+€0.7 bn). In contrast, Luxembourg (-€8.5 bn), Ireland (-€5.9 bn), and the U.K. (-€4.3 bn) were the domiciles with the highest estimated net outflows from mixed-assets funds.
Spain (+€0.5 bn) was the domicile with the highest estimated net inflows into alternative UCITS funds for Q1 2023, followed by Finland (+€0.1 bn) and the Netherlands (+€0.02 bn). Meanwhile, Luxembourg (-€9.6 bn), Ireland (-€2.1 bn), and France (-€1.0 bn) were at the other end of the table.
