European fund flows: Bonds benefit

Detlef Glow, head of EMEA Research at Thomson Reuters Lipper comments on the latest trends in the European fund industry throughout April.

Bonds are European investors’ darlings

After a bumpy start to the year 2016 the European fund industry enjoyed a second month with net inflows (+€13.0 bn) into long-term mutual funds during April. With regard to the overall flow pattern, it seemed that European investors were further in a risk-off mode, since they sold risky assets; equity funds (-€7.7 bn) were the asset type with the highest net outflows in Europe for April, bettered by “other” funds (-€0.3 bn). In contrast, bond funds (+€14.4 bn) were the best selling asset type for April, followed by alternative UCITS (+€5.7 bn), commodity products (+€0.4 bn), and mixed-asset funds (+€0.3 bn) as well as real estate products (+€0.1 bn).

Money Market Products

After heavy net outflows (-€30.0 bn) for March, money market products enjoyed net inflows (+€7.8 bn) for April.

This flow pattern drove the overall fund flows to mutual funds in Europe to net inflows of €20.8 bn for April With these inflows the European fund industry returned to a growth pattern, enjoying net inflows of €5.5 bn over the course of 2016 so far.

Money Market Products by Sector

Within the money market fund segment Money Market EUR (+€8.6 bn) was the best selling sector for April, followed by Money Market USD (+€2.1 bn) and Money Market NOK (+€0.1 bn). At the other end of the spectrum Money Market GBP (-€1.6 bn) suffered the highest net outflows, bettered somewhat by Money Market CHF (-€0.4 bn) and Money Market Global (-€0.4 bn). Comparing this flow pattern with the flow pattern for March showed that European investors sold the British pound and bought back into the euro, quite the opposite from March.

Graph 1: Estimated Net Sales by Asset Type, April 2016 (Euro Billions)

16-05-23 Graph 1 - ENS by Asset Type

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Bond EUR Corporates (+€2.6 bn) was again the best selling sector, followed by Equity Emerging Markets Global (+€2.2 bn), Bond Emerging Markets Global in Local Currency (+€1.9 bn), and Absolute Return Other (+€1.6 bn) as well as Bond Emerging Markets Global in Hard Currency (+€1.6 bn).

Graph 2: Ten Top Sectors, April 2016 (Euro Billions)

 16-05-23 Graph 2- Sector Flows

Source: Thomson Reuters Lipper

At the other end of the spectrum Equity Europe (-€3.7 bn) suffered the highest net outflows from long-term mutual funds, bettered somewhat by Equity Japan (-€2.6 bn) and Bond USD High Yield (-€2.1 bn) as well as Equity Eurozone (-€1.9 bn) and Bond EMU Government (-€1.2 bn).

Graph 3: Ten Bottom Sectors, April 2016 (Euro Billions)

16-05-23 Graph 3- Flop Sector Flows

Source: Thomson Reuters Lipper

Fund Flows by Markets

Single fund market flows (including those to money market products) showed an undecided picture for April, with 17 of the 34 markets covered in this report showing net inflows. France (+€11.7 bn)—driven by inflows into money market products, Luxembourg (+€5.9 bn), Denmark (+€2.6 bn), Germany (+€1.2 bn), and Norway (+€0.8 bn) were the domiciles with the highest overall net inflows, while Belgium was the single market with the highest net outflows (-€1.4 bn), bettered somewhat by Ireland (-€1.1 bn) and Spain (-€0.2 bn).

Graph 4: Estimated Net Sales by Fund Domiciles, April 2016 (Euro Billions)

16-05-23 Graph 4- Market Flows

Source: Thomson Reuters Lipper

Within the equity sector funds domiciled in Denmark (+€1.8 bn) led the table for April, followed by those domiciled in Belgium (+€0.5 bn), Sweden (+€0.3 bn), the Netherlands (+€0.2 bn), and Andorra (+€0.01 bn). Equity funds domiciled in Luxembourg (-€6.0 bn), Ireland (-€2.4 bn), and the United Kingdom (-€1.2 bn) stood at the other end of the table.

For bond funds, products domiciled in Ireland (+€5.9 bn) led the table for April, followed by funds domiciled in Luxembourg (+€4.7 bn), Norway (+€0.7 bn), and Denmark (+€0.7 bn) as well as Switzerland (+€0.6 bn). Meanwhile, Sweden (-€0.1 bn), Italy (-€0.1 bn), and Liechtenstein (-€0.1 bn) were the domiciles with the highest net outflows from bond funds.

With regard to mixed-asset products Germany (+€0.5 bn) was the domicile with the highest net inflows, followed by funds domiciled in Jersey (+€0.3 bn), Denmark (+€0.1 bn), Luxembourg (+€0.1 bn), and Switzerland (+€0.1 bn). On the other side of the table funds domiciled in the United Kingdom showed the highest net outflows (-€0.7 bn), bettered somewhat by funds domiciled in France (-€0.3 bn) and Belgium (-€0.03 bn).

Fund Flows by Promoters

Natixis Global Asset Management, with net sales of €6.4 bn, was the best selling fund group for April overall, ahead of BNP Paribas (+€4.6 bn) and JP Morgan (+€4.4 bn).

Table 1: Ten Best Selling Promoters, April 2016 (Euro Billions)

 16-05-23 Table 1 - Top Ten Promoter

Source: Thomson Reuters Lipper

Considering the single-asset bases, BlackRock (+€3.9 bn) was the best selling promoter of bond funds for April, followed by Aviva (+€1.2 bn), Pimco (+€0.9 bn), and Nordea (+€0.9 bn) as well as Union Investment (+€0.9 bn). Within the equity space Nordea (+€0.7 bn) stood at the head of the table, followed by Fundsmith LLP (+€0.5 bn), Amundi (+€0.5 bn), and Aviva (+€0.4 bn) as well as KBC (+€0.4 bn). The Italian Eurizon Capital (+€0.6 bn) was the leading promoter of mixed-asset funds in Europe, followed by Union Investment (+€0.3 bn), JP Morgan (+€0.2 bn), and Allianz (+€0.2 bn) as well as BNY Mellon (+€0.2 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €13.0 bn for April. The split of the ten best selling funds by asset type was somewhat in line with the overall sales numbers, since bond funds (+€6.5 bn) were—with five funds—the dominating asset type among the top-ten funds list, followed by equity funds—with four funds (+€5.9 bn), and mixed-asset funds—with one fund (+€0.6 bn).

Table 2: Ten Best Selling Funds, April 2016 (Euro Millions)

 16-05-23 Table 2 - Top Ten Funds

Source: Thomson Reuters Lipper

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