April 23, 2018

Monday Morning Memo: March 2018: European Investors Favor Equity Funds Despite Increased Volatility

by Detlef Glow.

European Fund-Flow Trends, March 2018

Even though the market environment turned negative, March was the fifteenth consecutive month showing a positive picture for long-term mutual fund flows. European fund promoters enjoyed net inflows into equity funds (+€3.4 bn), followed by mixed-asset funds (+€3.2 bn) and alternative UCITS funds (+€2.0 bn) as well as real estate funds (+€0.4 bn) and commodity funds (+€0.3 bn). Meanwhile, bond funds (-€3.0 bn) and “other” funds (-€2.7 bn) faced net outflows.

These fund flows added up to overall net inflows of €3.5 bn into long-term investment funds for March. ETFs contributed €0.7 bn to these inflows.

Money Market Products

After posting net outflows of €30.7 bn for February, money market funds again faced overall net outflows (-€9.7 bn) for March 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 €0.1 bn.

This flow pattern led the overall fund flows to mutual funds in Europe to overall net outflows of €6.2 bn for March and to estimated net inflows of €81.5 bn for the year 2018 so far.

Money Market Products by Sector

Money Market EUR (+€6.5 bn) and Money Market GBP (+€2.8 bn) were the two best selling sectors overall. The third best selling money market sector for the month was Money Market PLN (+€0.4 bn). At the other end of the spectrum Money Market USD (-€18.9 bn) suffered the highest net outflows overall, bettered significantly by Money Market EUR Leveraged (-€0.9 bn) and Money Market HUF (-€0.1 bn). Comparing this flow pattern with the flow pattern for February showed that European investors further sold the positions they had built in the U.S. dollar and bought back into the euro and the British pound sterling in March. 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, March 2018 (Euro Billions)

Mutual Funds - European Fund Flows Report March 2018

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Equity Emerging Markets Global (+€2.3 bn) was the best selling sector, followed by Bond EUR (+€2.0 bn), Target Maturity MA EUR 2025 (+€1.9 bn), and Bond EMU Government (+€1.4 bn) as well as the previous month’s best selling sector: Equity US (+€1.3 bn).

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

Mutual Funds - European Fund Flows Report March 2018

Source: Thomson Reuters Lipper

At the other end of the spectrum Bond USD High Yield (-€2.7 bn) suffered once again the highest net outflows from long-term mutual funds, bettered somewhat by Mixed-Asset Other Flexible (-€2.1 bn) and Bond EUR Corporates (-€2.1 bn) as well as Bond Global High Yield (-€1.9 bn) and Unclassified (-€1.9 bn).

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

Mutual Funds - European Fund Flows Report March 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 negative picture for March, with only 15 of the 34 markets covered in this report showing net inflows and 19 showing net outflows. France (+€5.1 bn)—driven by money market funds (+€3.1 bn)—was the fund domicile with the highest net inflows, followed by Ireland (+€4.9 bn), the United Kingdom (+€2.9 bn), Spain (+€0.8 bn), and Switzerland (+€0.7 bn).On the other side of the table Luxembourg, driven by net outflows from money market products (-€16.6 bn), was the single fund domicile with the highest net outflows (-€20.1 bn), bettered significantly by Germany (-€1.6 bn) and Denmark (-€0.5 bn).

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

Mutual Funds - European Fund Flows Report March 2018

Source: Thomson Reuters Lipper

Within the bond sector, funds domiciled in the United Kingdom (+€0.6 bn) led the table for March, followed by those domiciled in Belgium (+€0.3 bn), Sweden (+€0.2 bn), Germany (+€0.2 bn), and Norway (+€0.2 bn). Bond funds domiciled in Ireland (-€2.3 bn), Luxembourg (-€1.4 bn), and Italy (-€0.6 bn) stood at the other end of the table.

For equity funds, products domiciled in the United Kingdom (+€2.5 bn) led the table for March, followed by funds domiciled in Ireland (+€2.1 bn), Luxembourg (+€1.8 bn), and France (+€0.6 bn) as well as Norway (+€0.4 bn). Meanwhile, Germany (-€3.2 bn), Belgium (-€0.8 bn), and Denmark (-€0.3 bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed-asset products Italy (+€2.0 bn) was the domicile with the highest net inflows, followed by funds domiciled in the United Kingdom (+€0.7 bn), Germany (+€0.7 bn), Spain (+€0.5 bn), and Belgium (+€0.5 bn). In contrast, Luxembourg (-€1.8 bn), Switzerland (-€0.3 bn), and Jersey (-€0.04 bn) were the domiciles with the highest net outflows from mixed-asset funds.

Ireland (+€2.4 bn) was the domicile with the highest net inflows into alternative UCITS funds for March, followed by France (+€0.8 bn), Luxembourg (+€0.3 bn), and Germany (+€0.1 bn) as well as Sweden (+€0.04 bn). Italy (-€1.2 bn), bettered by the United Kingdom (-€0.4 bn) and the Netherlands (-€0.1 bn), stood at the other end of the table.

Fund Flows by Promoters

BlackRock, with net sales of €5.2 bn, was the best selling fund promoter for March overall, ahead of BNP Paribas Asset Management (+€4.5 bn) and Amundi (+€3.3 bn).

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

European Fund Flows Report March 2018

Source: Thomson Reuters Lipper

Considering the single-asset bases, BlackRock (+€1.3 bn) was the best selling promoter of bond funds, followed by Carmignac Gestion (+€0.6 bn), BNP Paribas Asset Management (+€0.5 bn), and Morgan Stanley (+€0.5 bn) as well as Bank of America Merrill Lynch (+€0.5 bn).

Within the equity space UBS (+€1.5 bn) stood at the head of the table, followed by Royal London (+€1.2 bn), Vanguard Group (+€1.0 bn), and DWS Group (+€0.7 bn) as well as Amundi (+€0.7 bn).

Eurizon Capital (+€1.8 bn) was the leading promoter of mixed-asset funds in Europe for March, followed by Amundi (+€1.1 bn), Allianz (+€1.0 bn), and JP Morgan (+€0.8 bn) as well as Union Investment (+€0.6 bn).

H2O Asset Management (+€0.8 bn) was the leading promoter of alternative UCITS funds for the month, followed by Old Mutual (+€0.7 bn), Blue Bay (+€0.4 bn), and Man Investments (+€0.4 bn) as well as Goldman Sachs (+€0.3 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €9.4 bn for March. With equity and mixed-asset funds dominating the overall sales numbers, the ranking of the asset types with regard to the ten best selling funds was not surprising: mixed-asset funds (+€4.2 bn) dominated the sales table for the ten top single funds, followed by bond funds (+€2.8 bn) and equity funds (+€1.6 bn).

Please note that the table of the ten best selling funds has been adapted because we witnessed some shifts within some Artemis funds over March, when investors sold the R Share class and bought back into other share classes of the same fund. A table with the affected funds and estimated net flows can be found in the Appendix.

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

European Fund Flows Report March 2018

Source: Thomson Reuters Lipper

Appendix

Below is a table with the share classes of the Artemis funds that would have been included in the ten best selling funds for March 2018 had they not been excluded because there were outflows from other share classes of the same portfolios. Artemis commented that the shift in assets was caused by distribution platforms that shifted money out of the R Share classes.

Table 3: Money Flows in Artemis Funds, March 2018 (Euro Millions)

European Fund Flows Report March 2018

Source: Thomson Reuters Lipper

 

 

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