Emerging markets and bond funds top Europe sales

Europeans put a net €283.1bn into investment funds last year, the highest amount since 2005, with flows into bond funds the “defining feature”, according to Lipper

Other defining characteristics for last year include 80% of total net European sales coming from funds sold across borders; dominance of emerging markets; banks pushing ETFs more than active funds; and high sales by Franklin Templeton.

Lipper expects the main theme for next year to be absolute return funds.
Europeans’ love of bonds is far from over. Last year, some 45% of net sales, or €126bn, went to fixed income products. Equities funds took €83.2bn.

Europeans broadened fixed income exposure from euro bond funds, dominant before the crisis, to developing markets products.

Five bond funds took in 28% of all net new money. They were Templeton Global Bond (€13.4bn); Pimco Total Return Bond (€7.8bn); Templeton Global Total Return (€6.2bn); Pictet Local Currency Emerging Debt (€4.8bn); and Axa US Short Duration High Yield (€4.5bn).

Overall, €56.2bn went into emerging market bond funds excluding pan-Asian products last year. This was over double any previous annual net subscriptions for that category.

The emerging markets theme was also important in equities.

Of €83.2bn net sales by equity products, over half (€45bn) were to developing markets products.

Such funds, and funds from groups advocating overweighting developing markets, took the top five places for equity product sales.

Templeton Asian Growth gathered Eur4bn; Aberdeen Global EM Equity took Eur3bn; Vanguard EM Stock Index received €2.7bn; Camignac Investissement took €2.3bn; and iShares MSCI EM had €2.1bn.

The benefit of selling across borders also became clear. Funds sourcing less than 80% of net new money from any one country took in €222.7bn, or 79% of total net sales.

Cross-border selling of bond funds leapt by 74%, or €75bn, to €130.7bn in 2010.

Measured by group net sales, Franklin Templeton did best (€31.4bn), followed by Allianz including Pimco (€20.5bn) and Carmignac Gestion (€16.9bn). Lipper said: “While some in the industry have been waiting for Carmignac to stumble, it has not done so.”

Overall, the best selling 25% of funds in Europe took one third of total market share.

Lipper predicted absolute return funds will join emerging markets products as the major themes in 2011. Absolute return sold €22.9bn last year, a 60% jump on 2009.

Lipper said: “While not ignoring the skeptics that continue to question the very term ‘absolute return’ it seems more likely that it will be these funds, even if not using the same labels, rather than emerging markets products that will build inflows further through 2011.”

After last year’s sales, European’s fund asset mix is 37% equities, 24% bonds, 21% money market, 9% mixed, 2% in property and 7% in other.

David Walker

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