European investors shy away from equities

The European fund industry enjoyed for May the third consecutive month with net inflows (+€1.3 bn) into long-term mutual funds. With regard to the overall flow pattern, it seemed that European investors continued in a risk-off mode, selling risky assets; equity funds (-€10.3 bn) were once again the asset type with the highest net outflows in Europe, bettered by “other” funds (-€0.2 bn) and mixed-asset products (-€0.2 bn). In contrast, bond funds (+€7.8 bn) were the best selling asset type for May, followed by alternative UCITS (+€2.5 bn), real estate products (+€0.9 bn), and commodity funds (+€0.8 bn).

Money Market Products

Money market products (+€13.8 bn) were the best selling asset type in Europe overall for May.

This flow pattern drove the overall fund flows to mutual funds in Europe to net inflows of €15.2 bn for May. With these inflows the European fund industry returned to a growth pattern, enjoying overall net inflows of €34.2 bn over the course of 2016 so far.

Money Market Products by Sector

Within the money market fund segment Money Market USD (+€14.0 bn) was the best selling sector for May, followed by Money Market GBP (+€3.1 bn) and Money Market NOK (+€0.1 bn). At the other end of the spectrum Money Market EUR (-€3.3 bn) suffered the highest net outflows, bettered by Money Market SEK     (-€0.4 bn) and Money Market EUR Leveraged (-€0.1 bn). Comparing this flow pattern with the flow pattern for April showed that European investors sold the euro and further bought back into the U.S. dollar, quite the opposite from April.

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

16-06-20 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 (+€2.0 bn) was once again the best selling sector, followed by Absolute Return EUR Medium (+€1.4 bn), Bond Global (+€1.3 bn), and Bond USD Short Term (+€1.2 bn) as well as Bond Global Corporates (+€1.1 bn).

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

 16-06-20 Graph 2- Sector Flows

Source: Thomson Reuters Lipper

At the other end of the spectrum Bond USD High Yield (-€3.4 bn) suffered the highest net outflows from long-term mutual funds, bettered somewhat by Equity Europe (-€3.3 bn) and Equity Japan (-€2.1 bn) as well as Loan Participation (-€1.6 bn) and Equity Eurozone (-€1.2 bn).

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

16-06-20 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 May, with 17 of the 34 markets covered in this report showing net inflows and 17 showing net outflows. Ireland (+€16.0 bn), Germany (+€1.9 bn), Switzerland (+€1.1 bn), Norway (+€0.8 bn), and the United Kingdom (+€0.6 bn) were the domiciles with the highest overall net inflows, while Belgium was the single market with the highest net outflows (-€2.7 bn), bettered by the Netherlands (-€1.4 bn) and Luxembourg (-€1.2 bn).

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

 16-06-20 Graph 4- Market Flows

Source: Thomson Reuters Lipper

Within the equity sector funds domiciled in Sweden (+€0.5 bn) led the table for May, followed by those domiciled in Norway (+€0.5 bn), Belgium (+€0.3 bn), Germany (+€0.1 bn), and Spain (+€0.1 bn). Equity funds domiciled in Luxembourg (-€7.5 bn), Ireland (-€1.4 bn), and France (-€0.8 bn) stood at the other end of the table.

For bond funds, products domiciled in Ireland (+€2.3 bn) led the table for May, followed by funds domiciled in Luxembourg (+€2.1 bn), Switzerland (+€0.8 bn), and France (+€0.6 bn) as well as Germany (+€0.5 bn). Meanwhile, Sweden (-€0.3 bn), Austria (-€0.1 bn), and the Czech Republic (-€0.02 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 Italy (+€0.2 bn), Switzerland (+€0.1 bn), Sweden (+€0.1 bn), and Denmark (+€0.04 bn). On the other side of the table funds domiciled in Luxembourg showed the highest net outflows    (-€0.3 bn), bettered somewhat by funds domiciled in France (-€0.3 bn) and the United Kingdom (-€0.1 bn).

Luxembourg (+€2.2 bn) was the domicile with highest net inflows into alternatives for May, followed by Ireland (+€0.5 bn), the United Kingdom (+€0.5 bn), and France (+€0.3 bn) as well as Malta (+€0.04 bn). The Netherlands (-€1.1 bn), bettered by Germany (-€0.1 bn) and Sweden (-€0.02 bn), stood at the other end of the table.

Fund Flows by Promoters

JP Morgan, with net sales of €4.8 bn, was the best selling fund promoter for May overall, ahead of BlackRock (+€4.3 bn) and Aviva (+€3.5 bn).

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

 16-06-20 Table 1 - Top Ten Promoter

Source: Thomson Reuters Lipper

Considering the single-asset bases, KBC (+€1.8 bn) was the best selling promoter of bond funds for May, followed by JP Morgan (+€1.7 bn), BlackRock (+€1.3 bn), and Pimco (+€1.1 bn) as well as Union Investment (+€0.8 bn). Within the equity space Union Investment (+€0.4 bn) stood at the head of the table, followed by Nordea (+€0.4 bn), KLP (+€0.4 bn), and KBC (+€0.3 bn) as well as Fundsmith LLP (+€0.3 bn). The German company Union Investment (+€0.4 bn) was the leading promoter of mixed-asset funds in Europe, followed by JP Morgan (+€0.3 bn), Deutsche Bank (+€0.3 bn), and Allianz (+€0.2 bn) as well as BNY Mellon (+€0.2 bn). Nordea (+€1.1 bn) was the leading promoter of alternative funds, followed by JP Morgan (+€0.6 bn), Amundi (+€0.3 bn), and Aviva (+€0.3 bn) as well as Old Mutual (+€0.3 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €6.7 bn for May. The split of the ten best selling funds by asset type was not in line with the overall sales numbers, since equity funds (+€3.8 bn) were—with five funds—the dominating asset type among the top-ten funds list, followed by bond funds—with three funds (+€1.7 bn), and real estate (+€0.6 bn) funds, as well as alternatives (+€0.6 bn) —with one fund each.

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

16-06-20 Table 2 - Top Ten Funds

Source: Thomson Reuters Lipper

Detlef Glow is head of EMEA Research at Thomson Reuters Lipper

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