- Mutual funds (+€45.96 bn) and ETFs (+€28.98 bn) enjoyed inflows for the month, with total estimated net inflows of €74.96 bn over the course of January 2025
- Money market funds (+€25.08 bn) were the best-selling asset type. This was followed by equity funds (+€23.29 bn) and bond funds (+€21.79 bn).
- For long-term assets only, ETFs net €27.32bn compared to €18.02bn for actively managed funds.
- Money Market EUR (+€15.22bn) was the best-selling classification, followed by Equity US (+€10.7bn), then Equity Global (+€10.2bn).
- BlackRock (+€8.53 bn) was the best-selling fund promoter in Europe for January.
The European fund industry saw inflows over January 2025.
This is despite political uncertainty, weak growth, high debt levels, prospective trade tariffs, and the war in Ukraine continuing to drag down European consumer confidence. Household saving ratios in the Euro area have risen sharply and exceed global financial crisis levels during the Global Financial Crisis.
Recent IMF forecasts predict further growth divergence across developed markets through 2025 after increasing its US forecast to 2.7%. US productivity growth continued to leave Europe behind, with the German and French economies both contracting in Q4 2024. UK growth also stalled in H2 2024, and high personal savings and low consumer confidence continue.
Underpinned by this above trend growth and demand, US inflation remains above target, restraining the Fed’s hand from further cuts in January. Meanwhile, Eurozone inflation ticked up to 2.5%, with the ECB forecasting an average 2.1% for 2025. While UK CPI dipped to 2.5% in December, a surge to 3% in January puts the Bank of England in a bind, caught by the Scylla and Charybdis of accelerating inflation and weak growth.
Goods inflation has returned to pre-Covid levels, reflecting the weakness in goods inflation globally.
The threat of tariffs is a wild card, creating a further challenge for central banks’ inflation targeting. Analysis from FTSE Russell notes that how far US trade tariff increases would push up 2025 inflation would depend on pass-through from importers to final consumer prices, and the strength of consumer demand.
Core depression
European manufacturing remains depressed. German manufacturing has been surpassed by the Netherlands and Spain. The country is particularly vulnerable to any cycle of tit-for-tat tariff implementation given its high proportion of exports to GDP (47% in 2023).
This weak economic backdrop, combined with broad geopolitical uncertainty, has had an impact on the Eurozone’s core bond markets, pushing seven- to 10-year German Bund yields above their Swedish equivalents, and French government bond yields are also rising above their Spanish equivalents. Across the fixed income piste in January, EM government bonds and Corporate HY outperformed, as high yield generally outperformed investment grade.
Turning to equities: overall, January was a good month. The S&P 500 rebounded strongly on January 10, and global indices along with it. The US blue chip index gave it its best shot for the best part of a fortnight, after which it took a breather into February. But the heavy lifting of delivering a decent first month for equity investors had been done.
Non-US equities played catch up, as Eurozone, FTSE 100, and Asia Pacific indices outperformed FTSE All-World. Conversely, the US, Japan, and the Emerging index lagged.
The broader environment reminds us that indices are not economies, and things look surprisingly good for corporate Europe. As of February 18, 170 companies in the STOXX 600 Index reported earnings for Q4 2024, according to StarMine. Of these, 59.4% reported earnings above analyst estimates. In a typical quarter (since 2012), 54% of companies beat estimates and 39% miss estimates.
Asset Type Flows
Mutual funds (+€45.96 bn) and ETFs (+€28.98 bn) enjoyed inflows for the month, with total estimated net inflows of €74.96 bn over the course of January 2025.
Asset Type Flows January 2025
Money market funds (+€25.08 bn) were the best-selling asset type overall for the month. This was followed by equity funds (+€23.29 bn), bond funds (+€21.79 bn), mixed assets (+€3.35 bn), alternatives (+€0.35 bn), and commodity funds (+€0.1 bn), while “other” funds (-€0.01 bn), and real estate funds (-€0.83 bn) faced outflows.
Graph 1: Estimated Net Flows by Asset and Product Type – January 2025 (in bn EUR)
Source: LSEG Lipper
Many things can inflate MMF flows, including concerns about economic uncertainty—of which there is much—anticipation of potential interest rate cuts by central banks, and the desire for a safe-haven asset—although messages are certainly mixed here (see p4). Cash still offers attractive yields as rates have been slower to come down than was anticipated this time last year, which also adds to the attraction of the asset class. Then there is the additional factor of companies using these vehicles to park cash, in corporate actions for such things as dividend payments.
The market has stayed on trend from 2024 with regard to equities, as ETFs took €24bn over the month, as mutual funds suffered outflows of €0.71bn. ETFs have yet to make quite the same dent in bond flows, taking €3.62bn, while their mutual fund peers took €21.74bn.
Fund Flows Active vs Passive Products
Graph 2: Estimated Net Flows by Management Approach and Product Type (January 2025)
Source: LSEG Lipper
Active mutual funds and ETFs finished the year pretty much neck-and-neck in 2024, with index-tracking mutual funds trailing behind. They lag even further in January, netting less than a tenth of ETFs. Actively managed mutual funds have obviously taken the largest slice of the pie. However, when this is looked at through the lens of long-term assets only, ETFs net €27.32bn compared to €18.02bn for actively managed funds. Index trackers’ take is nudged up slightly to €2.87bn, with MMF outflows of €0.11bn.
Fund Flows by Lipper Global Classifications
Given the popularity of MMFs over the month, there’s no surprise that Money Market EUR heads the table (+€15.22bn), with investors also allocating to Money Market GBP (+€6.2bn), Money Market TRY (€3.74bn), and Money Market Global (+€3.38bn). What’s more surprising is that at the other end of the table Money Market USD sheds €2.78bn. Possibly investors are exiting in anticipation of faster Fed rate cuts than anticipated off the back of softer US data, but given that the ECB and BoE are in a loosening cycle now (with certain provisos related to the UK January inflation print), my argument here doesn’t convince even me.
Equity US continues to rake in investors’ cash (+€10.7bn, with ETFs taking +€8.22bn of this), along with the increasingly US-heavy Equity Global (+€10.2bn, with +€7.74bn to ETFs).
Graph 3: Ten Best- and Worst Lipper Global Classifications by Estimated Net Sales, January 2025 (Euro Billions)
Source: LSEG Lipper
There’s an unusually large inflow into Target Maturity Other (€6.95bn), and the classification actually heads the table in our UK report. It’s most unusual to see this classification heading the table. However, this is counterbalanced by more than £6bn redeemed from another BlackRock share class, from its FutureWise range, which Lipper classifies as Mixed Asset GBP Aggressive. As a result, the latter sees the largest outflows for the month (-€5.72bn) is itself unusual in what is the most popular mixed-assets classification. On balance, this looks to be in the main a shifting of BlackRock clients from a number of its FutureWise funds into one single one.
Equity Asia Pacific ex Japan continues to be unpopular with investors (-€1bn), as does Equity Emerging Mkts Global (-€0.74bn). The combined outflows of Equity UK and Equity UK Small & Mid Cap (-€1.43bn) are largely a reflection of continued selling by domestic investors.
Fund Flows by Promoter
BlackRock (+€8.53 bn) was the best-selling fund promoter in Europe for January, followed by HSBC (+€7.61bn, largely down to MMFs), Amundi (+€6.69bn), DWS (+€4.87bn), and Vanguard (+€3.88bn). Given the product ranges of the 10-top promoters and the overall fund flow trends, it was not surprising to see that ETFs played a key role in the sales of the leading fund promoters in Europe, HSBC notwithstanding.
Graph 4: Ten Best-Selling Fund Promoters in Europe, January 2025 (Euro Millions)
Source: LSEG Lipper
