Market rebound in October fails to stop Europeans redeeming from funds

Investors in all but nine countries across greater Europe grew their assets in October as markets rebounded. But this did not stop investors in all but six of the region’s nations pulling money back from funds.

Assets in Europe’s fund industry grew by 2.3% in October, to go above €5.2trn. This is lower than the €5.5trn the industry had at the start of this year.

Despite net growth in the value of industry assets, only seven countries in Europe registered net sales in October, according to Lipper.

These were Finland, the Czech Republic, Slovakia, Romania, Bulgaria and Lithuania. Their total net inflows were €414m.

Just one company, Allianz Global Investors subsidiary Pimco, took in double that (€1bn) on its own. Muzinich (€680m) – helped by its Short Duration High Yield fund – and Prudential / M&G (€500m), also took in more than Europe’s top six fund buying nations combined in October.

Europeans either simply pulled money from the fund industry, or they rotated from risk assets and even absolute return and bond funds, into safer havens of gold/commodities funds, US dollar fixed income products and selective money market portfolios.

Overall, though, Europeans pulled €15.5bn from funds, excluding money market products.

While this was a poor figure, it was still far less than the €41.8bn they withdrew in September.

Absolute return funds suffered €700m October redemptions, leaving the sector with €4bn or withdrawals in the first 10 months of 2011.

Mixed asset funds had €900m taken back from them.

Bond funds had €1.2bn withdrawals, while equities funds wrote redemption cheques for €10.6bn.

In both cases these figures were far less severe than September’s €17.2bn net outflows for bonds, and €21bn for equities.

ING Investment Management commentary today suggested redeemers from equity funds might be wise to have pulled money, from European-focused portfolios at least. The Dutch-based manager expects Europe earnings to decline by up to 10% next year.

In October high yield funds took in €3bn net. This was a “pocket of positive activity” in Lipper’s view, but not enough to reverse €18.5bn net redemptions from that sector over the past four months.

Commodities funds took in €520m. Similarly, this was not enough to reverse September’s €1.3bn net redemptions. The most popular of the funds in October were from ZKB, Julius Baer and Lyxor.

Even when it came to the safest harbour – money market funds – Europeans became selective.

US dollar and euro products suffered €10.8bn net withdrawals, while sterling funds took in €8bn.

Brokers Clear Currency noted today the euro  is at 10- and 11-month lows versus the pound and US dollar, and “today it will be under further pressure as Italy will be auctioning more bonds.”




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