Mutual fund outflows back to 2008 levels

Lipper’s latest monthly snapshot of European fund flow trends (data as at end August 2011) makes for some gloomy reading.

Long-term funds in Europe suffered redemptions of €53.8bn in August (excluding money market funds). The latest month is not only the worst month since October 2008 (-€117.9bn), but also worse than most months that year, which averaged -€32.4bn.

The major change this month was that investors could no longer resist the allure of money market funds and the asset class attracted net sales of €28.3bn, thus reducing outflows from the industry across all asset classes to €25.6bn — the third month in a row that outflows have exceeded €20bn.

Investors’ fears were focused on equity funds (-€31.2bn) as stock markets plunged in both developed and developing economies, but even bond funds endured panicked clients heading for the lifeboats (-€13.9bn).

Franklin Templeton’s fixed income products again attracted sufficient sales to put the group at the top of the group rankings with net sales of €1.1bn, ahead of Standard Life (€400m).

While there were some positive moves into local Swedish products, as well as Global Emerging and Asian bonds, these were massively outweighed by the waves of investors pulling money from High Yield funds (-€9.2bn), € Corporate Bonds (-€3.6bn), as well as absolute return bond funds (-€1.5bn).

Apart from clinging to the lifebelt offered by money market funds, apparently the most popular sector this month was German equities, but here ETFs — likely being used to short the DAX — accounted for €2.4bn net sales while actively managed funds were in redemption. The only other equity sector to find some traction was Gold, where two Luxembourg and UK products from BlackRock accounted for 70% of the sector’s €580m in net sales.

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