March 26, 2018

Monday Morning Memo: ETFs Were the Driver Behind Fund Flows in Europe

by Detlef Glow

European Fund Flow Trends, February 2018

February was the fourteenth consecutive month showing a positive picture for long-term mutual funds. European fund promoters enjoyed net inflows into equity funds (+€16.1 bn), followed by mixed-asset funds (+€14.0 bn), alternative UCITS funds (+€2.6 bn), and bond funds (+€1.2 bn) as well as commodity funds (+€0.9 bn) and real estate funds (+€0.4 bn). Meanwhile, “other” funds (-€0.2 bn) faced net outflows.

These fund flows added up to overall net inflows of €35.0 bn into long-term investment funds for February. ETFs contributed €23.1 bn to these inflows.

Money Market Products

After net inflows of €29.8 bn for January, money market funds faced overall net outflows of €30.7 bn for February and were the worst selling asset type overall for the month. Opposite to their actively managed peers, ETFs investing in money market instruments posted net inflows of €0.5 bn.

This flow pattern led the overall fund flows to mutual funds in Europe to net inflows of €4.3 bn for February and to €102.9 bn for the year 2018 so far.

Money Market Products by Sector

Money Market Global (+€0.4 bn), followed by Money Market PLN (+€0.4 bn) and Money Market SEK (+€0.3 bn) were the best selling money market sectors for the month. At the other end of the spectrum Money Market EUR (-€15.5 bn) suffered the highest net outflows overall, bettered by Money Market USD (-€10.6 bn) and Money Market GBP (-€4.4 bn). Comparing this flow pattern with the flow pattern for January 2018 showed that European investors sold the positions they had built in the U.S. dollar and the euro in January. 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, February 2018 (Euro Billions)

European Fund Flows. February 2018

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Equity US (+€4.1 bn) was the best selling sector, followed by Bond Emerging Markets Global in Local Currencies (+€3.1 bn) along with Mixed-Asset GBP Balanced (+€3.0 bn) and Equity EuroZone (+€2.7 bn) as well as Mixed-Asset USD Balanced–Global (+€2.7 bn).

Graph 2: Ten Top Sectors, February 2018 (Euro Billions)

 European Fund Flows. February 2018

Source: Thomson Reuters Lipper

At the other end of the spectrum Bond USD High Yield (-€3.2 bn) suffered the highest net outflows from long-term mutual funds, bettered somewhat by Bond EUR Corporates (-€2.5 bn) and Bond Global High Yield (-€2.0 bn) as well as Target Maturity Bond EUR 2020+ (-€1.6 bn) and Absolute Return EUR Medium Term (-€1.4 bn).

Graph 3: Ten Bottom Sectors, February 2018 (Euro Billions)

European Fund Flows. February 2018

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 February, with 23 of the 34 markets covered in this report showing net inflows and 11 showing net outflows. Luxembourg (+€8.4 bn) was the fund domicile with the highest net inflows, followed by Belgium (+€3.0 bn), Switzerland (+€2.7 bn), Denmark (+€1.2 bn), and Spain (+€0.9 bn).On the other side of the table France, driven by net outflows from money market products, was the single fund domicile with the highest net outflows (-€10.0 bn), bettered by Ireland (-€4.8 bn) and Italy (-€0.1 bn).

Graph 4: Estimated Net Sales by Fund Domiciles, February 2018 (Euro Billions)

European Fund Flows. February 2018 

Source: Thomson Reuters Lipper

Within the bond sector, funds domiciled in Switzerland (+€1.9 bn) led the table for February, followed by those domiciled in France (+€1.0 bn), Belgium (+€0.5 bn), Norway (+€0.4 bn), and the Netherlands (+€0.4 bn). Bond funds domiciled in Spain (-€0.8 bn), Italy (-€0.6 bn), and Germany (-€0.6 bn) stood at the other end of the table.

For equity funds, products domiciled in Luxembourg (+€5.7 bn) led the table for February, followed by funds domiciled in Ireland (+€3.4 bn), France (+€2.8 bn), and Denmark (+€1.5 bn) as well as Spain (+€1.4 bn). Meanwhile, Sweden (-€0.4 bn), Belgium (-€0.4 bn), and Italy (-€0.4 bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed-asset products Luxembourg (+€5.4 bn) was the domicile with the highest net inflows, followed by funds domiciled in Ireland (+€3.2 bn), Italy (+€2.1 bn), Spain (+€0.9 bn), and Germany (+€0.7 bn). In contrast, Sweden (-€0.1 bn), Poland (-€0.03 bn), and the Netherlands (-€0.03 bn) were the domiciles with the highest net outflows from mixed-asset funds.

Ireland (+€2.2 bn) was the domicile with the highest net inflows into alternative UCITS funds for February, followed by Luxembourg (+€1.7 bn), France (+€0.7 bn), and Sweden (+€0.2 bn) as well as Denmark (+€0.1 bn). Italy (-€1.3 bn), bettered by the United Kingdom (-€0.9 bn) and Guernsey (-€0.1 bn), stood at the other end of the table.

Fund Flows by Promoters

Mercer, with net sales of €3.6 bn, was the best selling fund promoter for February overall, ahead of Bank Degroof Petercam (+€3.1 bn) and UBS (+€2.6 bn).

Table 1: Ten Best Selling Promoters, February 2018 (Euro Billions)

European Fund Flows. February 2018 

Source: Thomson Reuters Lipper

Considering the single-asset bases, UBS (+€3.2 bn) was the best selling promoter of bond funds, followed by BlackRock (+€1.3 bn), Deutsche Bank (+€0.8 bn), and Natixis (+€0.7 bn) as well as Carmignac Gestion (+€0.7 bn).

Within the equity space BlackRock (+€4.2 bn) stood once again at the head of the table, followed by Bank Degroof Petercam (+€2.8 bn), Amundi (+€1.8 bn), and Vanguard Group (+€1.2 bn) as well as Danske (+€1.0 bn).

Mercer (+€2.9 bn) was the leading promoter of mixed-asset funds in Europe for February, followed by Eurizon Capital (+€1.9 bn), BlackRock (+€1.1 bn), and Amundi (+€0.9 bn) as well as JP Morgan (+€0.7 bn).

Legg Mason (+€0.7 bn) was the leading promoter of alternative UCITS funds for the month, followed by H2O Asset Management (+€0.7 bn), Allianz (+€0.6 bn), and BMO (+€0.6 bn) as well as LRI (+€0.3 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €11.2 bn for February. Since equity funds dominated the overall sales numbers, it was surprising that mixed-asset funds (+€5.1 bn) dominated the sales table for the ten top single funds, followed by equity funds (+€4.9 bn) and bond funds (+€1.2 bn).

Table 2: Ten Best Selling Long-Term Funds, February 2018 (Euro Millions)

European Fund Flows. February 2018 

Source: Thomson Reuters Lipper

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