“Winner takes it all” in European fund flows, says Lipper
As the European debt crisis continues and fund providers struggle to attract inflows, the fund industry is dominated by a “winner takes it all” trend, says Lipper.
According to its latest industry report, the 10 most successful funds this year to end of July have attracted 31% of all net sales across all asset classes.
At the same time, the total number of funds in the industry has been on a steady increase over the past decade, rising from 18,542 in 2003 to 22,726 this year.
This trend is representative of a growing concentration of assets in the hands of the select few that have managed to top the fund list.
The trend is exacerbated by the fact that in 2007-08 and in 2011, the years most affected by the financial crisis, the industry suffered net outflows, so the funds that did manage to attract money stood out even more.
But Lipper notes that the most successful ten funds might not be taking “as large a share of the spoils” as it seems at first glance.
The reason for this is that the data is represented as a proportion of all funds in the industry, yet the proportion of funds attracting any money at all has been on a slow decline since 2003, down from around half of all funds to below 40%.
Considering the total number of funds in the industry, this represents a significant difference between the number of funds enjoying inflows back in 2003 and this year to date.
Lipper attributes this to the low risk appetite among European allocators, which is dampening demand for equity funds. At the same time, equity funds remain the most populous asset class by number of funds in Europe.
However, although the environment is not conducive to attracting new money, fund providers have not stopped launching new products.
The success of the top fund providers in attracting investment flows no doubt acts as a catalyst for fund houses to continue trying to gain competitive advantage through new launches.
Ed Moisson, Lipper’s head of UK and cross-border research, said: “Most reasonable-sized fund companies will look to ensure their product range can meet different, and evolving, investor demands, and hope to capture some of the money that has flooded into the best sellers.
“Such activity is one of the main drivers of the continued launching of new funds in the industry, although the net change in the number of funds in Europe has been under pressure in recent years.”