European investors chase yield despite market risks

Even though the general flow trends may have led to the assumption that European investors stayed cautious in July after the “Brexit” vote in the United Kingdom, the sector flows showed that they also further chased yield.

European investors sold equity funds (-€7.7 bn) and “other” funds (-€2.4 bn) in July, while they bought bond funds (+€25.4 bn), alternative UCITS products (+€4.0 bn), mixed-asset funds (+€1.6 bn), commodity products (+€1.0 bn), and real estate funds (+€0.1 bn). These fund flows drove the overall flows into long-term investment funds to a positive €22.0 bn for July.

Money Market Products

In conjunction with these flows, money market products (+€8.8 bn) also enjoyed healthy inflows during July.

This flow pattern drove the overall fund flows to mutual funds in Europe to net inflows of €30.8 bn for July. With these inflows the European fund industry enjoyed inflows of €96.1 bn over the course of 2016 so far.

Money Market Products by Sector

Within the money market fund segment Money Market EUR (+€13.3 bn) was the best selling sector for July, followed by Money Market EUR Leveraged (+€0.2 bn) and Money Market NOK (+€0.1 bn). At the other end of the spectrum Money Market USD (-€2.5 bn) suffered the highest net outflows, bettered by Money Market Global (-€1.2 bn) and Money Market GBP (-€0.8 bn). Comparing this flow pattern with the flow pattern for June showed that European investors sold the U.S. dollar and bought back into the euro.

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

16-08-22 Graph 1

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Bond Emerging Markets in Hard Currencies (+€5.4 bn) was the best selling sector, followed by Equity Emerging Markets Global (+€4.3 bn), Equity Global (+€3.0 bn), and Bond Emerging Markets in Local Currencies (+€2.6 bn) as well as Bond USD (+€2.4 bn).

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

 16-08-15 Graph 2 - Flows by Asset Type

Source: Thomson Reuters Lipper

At the other end of the spectrum Equity Europe (-€5.3 bn) suffered once again the highest net outflows from long-term mutual funds, bettered by Equity Eurozone (-€2.3 bn) and Equity Europe ex UK (-€2.1 bn) as well as Equity Europe Income (-€1.7 bn) and Equity UK (-€1.6 bn).

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

 16-08-15 Graph 3 Top LGC by AUM

Source: Thomson Reuters Lipper

Fund Flows by Markets

Single fund market flows (including those to money market products) showed an undecided picture for July, with 17 of the 34 markets covered in this report showing net inflows and 17 showing net outflows. Ireland (+€18.0 bn), France (+€18.0 bn), Germany (+€3.2 bn), Switzerland (+€0.6 bn), and Norway (+€0.5 bn) were the domiciles with the highest overall net inflows, while Luxembourg was the single market with the highest net outflows (-€5.5 bn), bettered by the United Kingdom (-€2.3 bn) and Belgium (-€1.6 bn).

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

 16-08-15 Graph 4 Smallest LGC by AUM

Source: Thomson Reuters Lipper

Within the equity sector, funds domiciled in Ireland (+€2.1 bn) led the table for July, followed by those domiciled in Belgium (+€1.2 bn), Germany (+€1.1 bn), Italy (+€0.4 bn), and Denmark (+€0.3 bn). Equity funds domiciled in the United Kingdom (-€5.6 bn), Luxembourg (-€5.6 bn), and France (-€0.7 bn) stood at the other end of the table.

For bond funds, products domiciled in Luxembourg (+€10.3 bn) again led the table for July, followed by funds domiciled in Ireland (+€9.7 bn), the United Kingdom (+€1.9 bn), and Germany (+€0.9 bn) as well as Switzerland (+€0.9 bn). Meanwhile, Denmark (-€0.3 bn), Austria (-€0.1 bn), and the Isle of Man (-€0.1 bn) were the domiciles with the highest net outflows from bond funds.

With regard to mixed-asset products Germany (+€0.7 bn) was the domicile with the highest net inflows, followed by funds domiciled in Luxembourg (+€0.5 bn), Ireland (+€0.4 bn), the United Kingdom (+€0.2 bn), and Italy (+€0.1 bn). On the other side of the table funds domiciled in Spain showed the highest net outflows  (-€0.1 bn), bettered somewhat by funds domiciled in Belgium (-€0.1 bn) and Poland (-€0.04 bn).

Luxembourg (+€2.9 bn) was the domicile with the highest net inflows into alternatives for July, followed by Ireland (+€1.2 bn), the United Kingdom (+€0.5 bn), and France (+€0.1 bn) as well as Spain (+€0.1 bn). Italy   (-€0.5 bn), bettered by Germany (-€0.2 bn) and Sweden (-€0.1 bn), stood at the other end of the table.

Fund Flows by Promoters

BlackRock, with net sales of €9.1 bn, was once again the best selling fund promoter for July overall, ahead of Amundi (+€7.8 bn) and Natixis Global Asset Management (+€3.1 bn).

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

 16-08-22 Table 1 - Top Promoter

Source: Thomson Reuters Lipper

Considering the single-asset bases, BlackRock (+€5.6 bn) was the best selling promoter of bond funds for July, followed by Pictet (+€2.1 bn), KBC (+€2.1 bn), and Pimco (+€1.7 bn) as well as AB (+€1.3 bn). Within the equity space KBC (+€1.3 bn) stood at the head of the table, followed by Union Investment (+€1.1 bn), Vanguard (+€0.7 bn), and State Street (+€0.6 bn) as well as Nordea (+€0.6 bn). BNY Mellon (+€0.4 bn) was the leading promoter of mixed-asset funds in Europe, followed closely by Sparinvest (+€0.4 bn), Union Investment (+€0.4 bn), and Amundi (+€0.3 bn) as well as JP Morgan (+€0.2 bn). Nordea (+€2.2 bn) was the leading promoter of alternatives funds for the month, followed by Flosbach von Storch (+€0.4 bn), Invesco (+€0.4 bn), and BNY Mellon (+€0.3 bn) as well as Blackstone (+€0.3 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €8.7 bn for July. The split of the ten best selling funds by asset type was somewhat in line with the overall sales numbers, since target maturity (+€3.1 bn) was the dominating asset type among the top-ten funds list, followed by bond funds—with four funds (+€2.7 bn), absolute return products (+€1.4 bn)—with two funds, and equity funds (+€0.8 bn) and commodity funds (+€0.7 bn)—with one fund each.

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

 16-08-22 Table 2 - Best Selling Funds

Source: Thomson Reuters Lipper

Detlef Glow is head of EMEA Research at Thomson Reuters Lipper 

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