The European fund industry enjoyed inflows over the course of March 2024. These inflows occurred in a further unstable market environment since the geopolitical tensions in Middle East, especially the Red Sea, increased over the course of the month. Nevertheless, since a number of shipping companies these days avoid the passage of the Suez channel, it is to be expected that the prolonged delivery times will cause some tensions for the still vulnerable delivery chains.
Market sentiment was further driven by hopes that central banks—especially the U.S. Federal Reserve—have reached the last phase of their fight against high and further increasing inflation rates given their rather dovish statements during/after the respective central bank meetings. That said the statements from the U.S. Fed in January and March about a possible start of lowering interest rates might have caught some investors on the wrong foot, as the central bank indicated that it may start the lowering of interest rates later and with less steps in 2024 than some investors expected. These statements might have impacted the estimated net flows in bond and money market ETFs. In addition, some investors may have also reviewed their expectations for bonds, as there is the risk that the inflation in the major economies might be more sticky than expected and central banks are held responsible to reach their inflation targets. In addition, there are still some concerns about the possibility of a recession in the U.S. and other major economies around the globe. These fears have been raised by a lack of growth in some economies and the long-term inverted yield curves, which are seen as an early indicator for a possible recession. The normalization of inverted yield curves might be another short-term challenge for the bond markets.
That said, some major equity indices reached new all-time high values over the course of March 2024 despite the headwinds mentioned above.
Assets Under Management in the European Fund Industry
Within this environment the assets under management in the European fund industry increased from €14,371.1 bn as of December 31, 2023, to €15,160.9 bn at the end of March 2024.
Graph 1: Assets Under Management in the European Fund Industry, January 1, 2003 – March 31, 2024 (in million EUR)
Source: LSEG Lipper
The increase in assets under management of €789.8 bn was mainly driven by the performance of the underlying markets (+€723.3 bn), while estimated net sales contributed €66.5 bn to the overall growth.
Assets Under Management by Product Type
The majority of assets under management in the European fund industry were held by actively managed mutual funds (€11,700.0 bn), followed by index tracking mutual funds (€1,740.3 bn) and exchange traded funds (ETFs) (€1,720.5 bn). It is noteworthy that the assets under management in ETFs reached a new all-time high at the end of March 2024.
The gap in assets under management between index tracking mutual funds and ETFs increased over the course of 2024 since the assets under management in index tracking mutual funds surpassed the assets under management of ETFs over the course of the first three months of 2024, despite the higher inflows in ETFs (+€48.1 bn) compared to index tracking mutual funds (+€15.9 bn).
Graph 2: Market Share, Assets Under Management in the European Fund Industry by Product Type, March 31, 2023
Source: LSEG Lipper
The preference of European investors for ETFs compared to index tracking mutual funds started to become obvious in 2021.
Assets Under Management by Asset Type
In more detail, equity products (€6,568.0 bn) held the largest amount of assets, followed by bond products (€3,461.8 bn), mixed-assets products (€2,607.6 bn), money market products (€1,847.5 bn), alternatives products (€348.7 bn), real estate products (€247.0 bn), commodities products (€55.8 bn), and “other” products (€24.6 bn).
Graph 3: Market Share, Assets Under Management in the European Fund Industry by Asset Type, March 31, 2024
Source: LSEG Lipper
Assets Under Management by SFDR Article
With regard to the assigned article of the Sustainable Finance Disclosure Regulation (SFDR), it is no surprise that funds assigned to article 8 of the SFDR (€7,082.6 bn) held the largest amount of assets, followed by funds assigned to article 6 of the SFDR (€5,277.3 bn), funds with no assigned to an SFDR article (€2,442.6 bn), and funds assigned to article 9 of the SFDR (€358.4 bn).
Graph 4: Market Share, Assets Under Management in the European Fund Industry by SFDR Article, March 31, 2024
Source: LSEG Lipper
Since this report does cover the whole of Europe, it is no surprise that a high percentage of the assets under management are held by funds which are not assigned to an SFDR article. These funds are mainly domiciled in countries outside of the EU and are not registered for sales in the EU.
Asset Type Flows
Mutual funds (+€2.5 bn) enjoyed shy inflows over the course of the month, while ETFs (+€11.0 bn) enjoyed healthy inflows. This flow pattern led to overall estimated net inflows of €13.5 bn over the course of March 2024.
Asset Type Flows March 2024
In more detail, bond funds (+€27.9 bn) were the best-selling asset type overall for March 2024. The category was followed by money market funds (+€4.9 bn) and commodities funds (+€0.3 bn), while “other” funds (-€0.1 bn), alternatives funds (-€1.5 bn), real estate funds (-€1.8 bn), equity funds (-€5.4 bn), and mixed-assets funds (-€10.8 bn) faced outflows.
Graph 5: Estimated Net Flows by Asset and Product Type – March 2024 (in bn EUR)
Source: LSEG Lipper
Asset Type Flows Year to Date
The flow pattern for March drove the estimated overall net flows in the European fund industry up to €66.5 bn for the year 2024.
Mutual funds (+€18.4 bn) and ETFs (+€48.1 bn) enjoyed inflows over the course of the year 2024 so far. These inflows within the still somewhat uncertain market environment are not considered unusual given the fact that some major market indices are still reaching new all-time highs.
With regard to the inverted yield curves for the Eurozone and other major economies in the world, it is somewhat surprising that European investors favored bond products over the course of the year. These inflows might be seen as a sign that European investors anticipate the ending of the interest hiking cycle of central banks around the globe led by the U.S. Federal Reserve sooner rather than later.
Overall, long-term investment products (+€43.0 bn) and money market funds (+€23.5 bn) enjoyed inflows for the year so far.
Taking a closer look, bond funds (+€89.3 bn) were the asset type with the highest estimated net inflows overall for 2024. It is followed by money market funds (+€23.5 bn), equity funds (+€2.3 bn), and commodities funds (+€0.03 bn). On the other side, “other” funds (-€0.0 bn), real estate funds (-€4.9 bn), alternatives funds (-€7.5 bn), and mixed-assets funds (-€36.2 bn) faced outflows for the year so far.
Graph 6: Estimated Net Sales by Asset and Product Type, January 1 – March 31, 2024 (Euro Billions)
Source: LSEG Lipper
The shy inflows into equity funds over the course of the year so far are somewhat surprising given the performance of some major equity indices around the world. Therefore, this might be a sign that European investors have become cautious with regard to the future developments on the equity markets.
Asset Type Flows Year to Date by SFDR Article
The flow pattern by SFDR article shows that European investors prefer funds which are assigned to article 6 of the SFDR. Since these products do not foster sustainable criteria, one may think that European investors are neglecting sustainable investment strategies in their portfolios.
That said, one needs to bear in mind that the majority of ETFs in Europe are tracking plain vanilla indices and are therefore assigned to article 6 of the SFDR. The same is somewhat true for money market products. This means that the flows by SFDR article are rather caused by product and asset type preferences than by a preference for funds which do not use ESG/sustainability criteria.
In more detail, funds assigned to article 6 of the SFDR (+€41.6 bn) were the product type with the highest estimated net inflows overall for 2024 so far, followed by funds assigned to article 8 of the SFDR (+€23.2 bn) and funds assigned to article 9 of the SFDR (+€11.3 bn). Opposite to this, funds with no assignment to an SFDR article (-€9.6 bn) faced outflows for the year so far.
Graph 7: Estimated Net Sales by Asset and Product Type, January 1 – March 31, 2024 (Euro Billions)
Source: LSEG Lipper
Fund Flows Active vs Passive Products
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 (+€48.1 bn) were outpacing the flows into passive index mutual funds (+€15.9 bn) by a large margin over the course of the year. Conversely, actively managed mutual funds enjoyed only very shy inflows (+€2.5 bn) for the first three months of 2024.
Graph 8: Estimated Net Flows by Management Approach and Product Type (January 1 – March 31, 2024)
Source: LSEG Lipper
Some market observers may speculate that European investors are selling actively managed products and buying back passive products. Generally speaking, one could agree with this thesis by looking at the high-level numbers, but since this can’t be proven by facts, I would not totally agree with this assumption.
In addition, one needs to bear in mind that the flows in money market products 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. Given the inverted yield curves, it can be assumed that a number of investors use money market products as replacements for cash accounts since money market products offer a comparably high yield within the current interest rate environment. Therefore, it can be expected that the inflows in money market products may revert once the yield curves have been normalized.
Fund Flows by Lipper Global Classifications, March 2024
Given the unstable economic outlooks and the inverted yield curves, it was not surprising that Money Market EUR (+€25.5 bn) dominated the table of the 10 best-selling peer groups by estimated net flows for March. It was followed by Target Maturity Bond EUR 2020+ (+€7.5 bn), Equity Global (+€5.6 bn), Money Market GBP (+€3.4 bn), and Bond EUR Corporates (+€2.4 bn).
Graph 9: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, March 2024 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, Money Market USD (-€24.0 bn) faced the highest estimated net outflows for March, bettered by Equity Europe (-€4.2 bn) and Mixed Asset EUR Balanced – Global (-€2.3 bn).
A closer look at the best- and worst-selling Lipper Global Classifications for March shows that European investors were somewhat in risk-off mode with regard to their risk appetite over the course of the month. On one hand, European investors increased their positions in money market products mainly in EUR. On the other hand, they bought equities and bonds from various classifications. In addition, they further reduced their exposure to mixed-assets products (mainly in EUR) since these products may have been used to generate yield and income over the low-interest rates period.
Fund Flows by Lipper Global Classifications, Year to Date
Opposite to the flow trend for March, a closer look at the best- and worst-selling Lipper Global Classifications for the first three months of 2024 shows that European investors are somewhat in a risk-on mode, since long-term products are dominating the table of the best-selling Lipper Global Classifications.
As graph 6 shows, mixed-assets products faced the highest outflows over the course of the year 2024, 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 is dominated by bond classifications, while mixed-assets classifications dominated the other side of the table.
Money Market EUR (+€27.8 bn) was the best-selling Lipper global classification for the year so far. It was followed by Equity Global (+€21.1 bn), Bond Global USD (+€17.4 bn), Target Maturity Bond 2020+ (+€15.1 bn), and Equity US (+€10.5 bn).
Graph 10: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, January 1 – March 31, 2024 (Euro Billions)
Source: LSEG Lipper
Given the current market environment, it was not surprising to see so many mixed-assets classifications on the opposite side of the table since European investors seem to be readjusting their portfolios to the new environment in the bond markets after the central banks around the globe may end their interest rate hiking cycles over the course of the year. Money Market USD (-€9.3 bn) faced the highest outflows for the year. It was bettered by Equity Europe (-€7.9 bn), Mixed Asset EUR Flexible – Global (-€7.6 bn), Mixed Asset GBP Balanced (-€7.5 bn), and Mixed Asset EUR Balanced – Global (-€6.9 bn).
As mentioned above, 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 outflows from Money Market GBP are the aftermath of the LDI crisis. It is also important to recall 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, March 2024
Amundi (+€5.6 bn) was the best-selling fund promoter in Europe for March, ahead of BNP Paribas (+€5.4 bn), Ostrum Asset Management (+€4.7 bn), HSBC (+€4.4 bn), and PIMCO (+€2.5 bn). Given the product ranges of the 10-top promoters and the overall fund flow trends, it was not surprising to see that ETFs didn’t play a more important role for the positions of the leading fund promoters in Europe over the course of March.
Graph 11: Ten Best-Selling Fund Promoters in Europe, March 2024 (Euro Millions)
Source: LSEG Lipper
Fund Flows by Promoters, Year to Date
HSBC (+€14.5 bn) is the best-selling fund promoter in Europe over the course of the year so far, ahead of UBS (+€9.5 bn), BlackRock (+€9.1 bn), Amundi (+€8.9 bn), and Vanguard (+€7.7 bn). Opposite to the monthly flows, it was not surprising to see that ETFs played a major role for the inflows and the respective league table positions of the leading fund promoter in Europe.
Graph 12: Ten Best-Selling Fund Promoters in Europe, January 1 – March 31, 2024 (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.
