European investors chase yield in global bond sectors during April 2017

April was the fourth consecutive month showing a positive picture for long-term mutual funds. European fund promoters enjoyed net inflows into bond funds (+€21.0bn), followed by mixed-asset funds (+€8.4bn), equity funds (+€6.4bn), and alternative UCITS products (+€2.1bn) as well as real estate funds (+€0.4bn) and commodity products (+€0.3bn). The only asset type with net outflows in the long-term investment funds segment was once again “other” funds (-€0.4bn).

These fund flows added up to overall net inflows of €38.2bn into long-term investment funds for April. Exchange-traded funds (ETFs) contributed €4.1bn to these flows.

Money Market Products
Money market products (+€15.7bn) were the second best selling asset type overall for April. In line with their actively managed peers ETFs investing in money market instruments also enjoyed net inflows (+€0.2bn).

This flow pattern led the overall fund flows to mutual funds in Europe to net inflows of €54.0bn for April and €266.5bn for 2017 so far.

Money Market Products by Sector
Money Market GBP (+€10.6bn) was once again the best selling sector overall for April, followed by Money Market USD (+€8.8bn) and Money Market Global (+€2.0bn). At the other end of the spectrum Money Market EUR (-€5.3bn) suffered the highest net outflows for the money market sectors, bettered by Money Market EUR Leveraged (-€0.5bn) and Money Market SEK (-€0.1bn). Comparing this flow pattern with the flow pattern for March 2017 shows that European investors further increased their positions in the British pound sterling—the best selling money market sector for February and March—and sold the euro after they had increased their EUR positions in March.

Graph 1: Estimated Net Sales by Asset Type, April 2017 (€bn)

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Bond Global (+€5.1bn) was once again the best selling sector, followed by Bond Emerging Markets Global in Hard Currencies (+€3.7bn), Equity Emerging Markets Global (+€2.4bn), and Bond Emerging Markets in Local Currencies (+€2.3bn) as well as Bond Global High Yield (+€2.0bn).

Graph 2: Ten Top Sectors, April 2017 (€bn)

Source: Thomson Reuters Lipper

At the other end of the spectrum Equity US (-€5.3bn) suffered the highest net outflows from long-term mutual funds, bettered somewhat by Bond EMU Government (-€1.2bn) and Bond EUR Corporate (-€0.9bn) as well as Target Maturity Bond EUR 2020+ (-€0.7bn) and Protected (-€0.5bn).

Graph 3: Ten Bottom Sectors, April 2017 (€bn)

Source: Thomson Reuters Lipper

Fund Flows by Markets (Fund Domiciles)
Single fund domicile flows (including those to money market products) showed in general a positive picture for April, with 22 of the 34 markets covered in this report showing net inflows and 12 showing net outflows. Luxembourg (+€22.3bn) was the fund domicile with the highest net inflows, followed by Ireland (+€22.0bn), the United Kingdom (+€5.5bn), Germany (+€2.3bn), and Sweden (+€1.2bn).On the other side of the table Spain was once again the single fund domicile with the highest net outflows (-€0.9bn), bettered somewhat by Finland (-€0.6bn) and Italy (-€0.2bn).

Graph 4: Estimated Net Sales by Fund Domiciles, April 2017 (€bn)

Source: Thomson Reuters Lipper

Within the bond sector, funds domiciled in Luxembourg (+€10.2bn) led the table for April, followed by those domiciled in Ireland (+€6.9bn), the United Kingdom (+€1.9bn), Switzerland (+€1.0bn), and France (+€0.7bn). Bond funds domiciled in Spain (-€0.7bn), Italy (-€0.2bn), and the Netherlands (-€0.1bn) stood at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€2.5bn) led the table for April, followed by funds domiciled in the United Kingdom (+€1.5bn), Ireland (+€1.2bn), and the Netherlands (+€0.6bn) as well as Sweden (+€0.6bn). Meanwhile, Switzerland (-€1.5bn), Finland (-€0.7bn), and Norway (-€0.1bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed-asset products Luxembourg (+€5.1bn) was the domicile with the highest net inflows, followed by funds domiciled in the United Kingdom (+€0.8bn), Germany (+€0.7bn), Italy (+€0.5bn), and Liechtenstein (+€0.5bn). On the other side of the table funds domiciled in Spain showed the highest net outflows (-€0.2bn), bettered by funds domiciled in Jersey (-€0.1bn) and Denmark (-€0.1bn).

Ireland (+€1.4bn) was the domicile with the highest net inflows into alternatives for April, followed by the United Kingdom (+€0.5bn), Germany (+€0.1bn), and France (+€0.1bn) as well as Spain (+€0.1bn). Italy (-€0.4bn), bettered by the Isle of Man (-€0.02bn) and Guernsey (-€0.001bn), stood at the other end of the table.

Fund Flows by Promoters
BlackRock, with net sales of €5.4bn, was the best selling fund promoter for April overall, ahead of PIMCO (+€4.4bn) and Northern Trust (+€3.9bn).

Table 1: Ten Best Selling Promoters, April 2017 (€bn)

Source: Thomson Reuters Lipper

Considering the single-asset bases, PIMCO (+€4.3bn) was the best selling promoter of bond funds for April, followed by BlackRock (+€2.3bn), UBS (+€2.3bn), and AB (+€0.8bn) as well as Carmignac Gestion (+€0.7bn).

Within the equity space Northern Trust (+€0.8bn) stood at the head of the table for April, followed by Pictet (+€0.6bn), KBC (+€0.6bn), and ZwitserLeven (+€0.5bn) as well as Goldman Sachs (+€0.5bn).

Allianz (+€0.9bn) was the leading promoter of mixed-asset funds in Europe for April, followed by Union Investment (+€0.6bn), Nordea (+€0.6bn), and JP Morgan (+€0.5bn) as well as Amundi (+€0.5bn).

GAM (+€0.9bn) was the leading promoter of alternatives funds for the month, followed by Aviva (+€0.7bn), Pictet (+€0.5bn), and Henderson (+€0.3bn) as well as Deutsche Bank (+€0.2bn).

Best Selling Funds
The ten best selling long-term funds gathered at the share-class level total net inflows of €8.3bn for April. The split of the ten best selling funds by asset type was not in line with the overall sales numbers. Since bond funds dominated the overall sales numbers, it was surprising that equity funds (+€4.2bn) dominated the sales table for the single funds, followed by bond funds (+€2.8bn) and mixed-asset funds (+€1.4bn).

Table 2: Ten Best Selling Long-Term Funds, April 2016 (€bn)

Source: Thomson Reuters Lipper

Detlef Glow is head of EMEA Research, Thomson Reuters Lipper

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