August 28, 2017

Monday Morning Memo: European Investors Look Globally for Yield

by Detlef Glow

European Fund-Flow Trends, July 2017

July was the seventh consecutive month showing a positive picture for long-term mutual funds. European fund promoters enjoyed net inflows into equity funds (+€19.1 bn), followed by bond funds (+€17.1 bn), mixed-asset funds (+€10.3 bn), alternative UCITS funds (+€5.3 bn), and commodity funds (+€0.3 bn) as well as real estate funds (+€0.1 bn). Meanwhile, “other” funds (-€1.3 bn) faced net outflows.

These fund flows added up to overall net inflows of €51.1 bn into long-term investment funds for July. ETFs contributed €7.8 bn to these flows.

Money Market Products

In line with long-term products money market products (+€14.3 bn) posted net inflows for July. Opposite to their actively managed peers, ETFs investing in money market instruments posted a small net outflow (-€0.1 bn).

This flow pattern led the overall fund flows to mutual funds in Europe to net inflows of €65.3 bn for July and a positive €451.6 bn for 2017 so far.

Money Market Products by Sector

Money Market USD (+€18.4 bn) was the best selling money market sector for July, followed by Money Market NOK (+€0.2 bn) and Money Market PLN (+€0.2 bn). At the other end of the spectrum Money Market GBP      (-€2.1 bn) suffered again the highest net outflows overall, bettered slightly by Money Market EUR (-€2.1 bn) and Money Market CHF (-€0.2 bn). Comparing this flow pattern with the flow pattern for June 2017 showed that European investors further decreased their exposure to the euro and the British pound sterling, while they bought back into the U.S. dollar. These shifts might have been caused by asset allocation decisions as well as for other reasons such as cash dividends or payments, since money market funds are also used by corporations as replacements for cash accounts.

Graph 1: Estimated Net Sales by Asset Type, July 2017 (Euro Billions)

European Fund Flows July 2017

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Equity Global (+€5.4 bn) was the best selling sector, followed by the favourite sector of the last few months, Bond Global (+€3.6 bn), along with Bond EUR Short Term (+€3.3 bn), and Equity Europe (+€3.3 bn) as well as Equity Eurozone (+€2.3 bn).

Graph 2: Ten Top Sectors, July 2017 (Euro Billions)

European Fund Flows July 2017

Source: Thomson Reuters Lipper

At the other end of the spectrum Bond USD High Yield (-€1.9 bn) suffered once again the highest net outflows from long-term mutual funds, bettered somewhat by Target Maturity MA EUR 2035 (-€1.3 bn) and Bond EUR High Yield (-€0.9 bn) as well as Target Maturity Bond EUR 2020+ (-€0.8 bn) and Bond EUR (-€0.6 bn).

Graph 3: Ten Bottom Sectors, July 2017 (Euro Billions)

European Fund Flows July 2017

Source: Thomson Reuters Lipper

 Fund Flows by Markets (Fund Domiciles)

Single fund domicile flows (including those to money market products) showed in general a positive picture for July, with 24 of the 34 markets covered in this report showing net inflows and 10 showing net outflows. Luxembourg (+€21.2 bn) was the fund domicile with the highest net inflows, followed by Ireland (+€20.6 bn), France (+€9.3 bn), the United Kingdom (+€6.7 bn), and Germany (+€4.1 bn).On the other side of the table Denmark was the single fund domicile with the highest net outflows (-€1.3 bn), bettered by Italy (-€0.6 bn) and Portugal (-€0.2 bn).

Graph 4: Estimated Net Sales by Fund Domiciles, July 2017 (Euro Billions)

European Fund Flows July 2017

Source: Thomson Reuters Lipper

Within the bond sector, funds domiciled in Ireland (+€8.8 bn) led the table for July, followed by those domiciled in Luxembourg (+€6.1 bn), France (+€1.6 bn), the United Kingdom (+€0.8 bn), and Switzerland (+€0.6 bn). Bond funds domiciled in Denmark (-€1.4 bn), Italy (-€0.3 bn), and Austria (-€0.3 bn) stood at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€5.6 bn) led the table for July, followed by funds domiciled in the United Kingdom (+€4.8 bn), Ireland (+€3.7 bn), and Germany (+€2.8 bn) as well as France (+€1.3 bn). Meanwhile, Sweden (-€0.4 bn), Denmark (-€0.3 bn), and Italy (-€0.2 bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed-asset products Luxembourg (+€3.9 bn) was the domicile with the highest net inflows, followed by funds domiciled in the United Kingdom (+€1.5 bn), Germany (+€1.3 bn), Italy (+€1.0 bn), and France (+€0.6 bn). It is remarkable that no fund domicile analyzed in this report showed net outflows from mixed-asset funds.

Luxembourg (+€3.2 bn) was the domicile with the highest net inflows into alternative UCITS funds for July, followed by Ireland (+€2.1 bn), France (+€0.7 bn), and the United Kingdom (+€0.1 bn) as well as Spain (+€0.1 bn). Italy (-€1.1 bn), bettered by the Netherlands (-€0.03 bn) and Malta (-€0.02 bn), stood at the other end of the table.

Fund Flows by Promoters

Amundi, with net sales of €13.5 bn (driven by flows into money market products [+€11.6 bn]), was the best selling fund promoter for July overall, ahead of BlackRock (+€6.7 bn) and BNY Mellon (+€6.2 bn). It is remarkable that more than half the inflows for BlackRock came from its ETF branch iShares, which contributed €3.6 bn to the overall net inflows. The possible impact of ETFs on the overall flows of a promoter became more visible at UBS, which gathered €1.6 bn of the overall inflows (+€2.1 bn) through its UBS ETF branch.

Table 1: Ten Best Selling Promoters, July 2017 (Euro Billions)

European Fund Flows July 2017

Source: Thomson Reuters Lipper

Considering the single-asset bases, PIMCO (+€4.0 bn) was once again the best selling promoter of bond funds for July, followed by BlackRock (+€1.7 bn), AB (+€1.0 bn), and Credit Suisse Group (+€1.0 bn) as well as Amundi (+€0.7 bn).

Within the equity space Baillie Gifford (+€2.9 bn) stood at the head of the table for July, followed by BlackRock (+€2.6 bn), Deutsche Bank (+€1.4 bn), and UBS (+€1.0 bn) as well as Vanguard Group (+€0.9 bn).

Allianz (+€1.1 bn) was the leading promoter of mixed-asset funds in Europe for July, followed by JP Morgan (+€1.0 bn), Eurizon Capital (+€0.9 bn), and M&G (+€0.8 bn) as well as Union Investment (+€0.6 bn).

GAM (+€0.8 bn) was once again the leading promoter of alternatives funds for the month, followed by Boussard & Gavaudan Gestion (+€0.4 bn), Legg Mason (+€0.4 bn), and Aviva (+€0.4 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 €8.3 bn for July. The split of the ten best selling funds by asset type was in line with the overall sales numbers. Since equity funds dominated the overall sales numbers, it was not surprising that equity funds (+€4.0 bn) also dominated the sales table for the single funds, followed by bond funds (+€2.3 bn), mixed-asset funds (+€0.8 bn), and commodity funds (+€0.6 bn) as well as alternative UCITS funds (+€0.5 bn).

Table 2: Ten Best Selling Long-Term Funds, July 2017 (Euro Millions)

European Fund Flows July 2017

Source: Thomson Reuters Lipper

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