May 28, 2018

Monday Morning Memo: European Investors Continue in “Risk-on” Mode

by Detlef Glow

Even though the market environment turned negative, April was the sixteenth consecutive month showing a positive picture for long-term mutual fund flows. European fund promoters enjoyed net inflows into mixed-asset funds (+€5.0 bn), followed closely by equity funds (+€5.0 bn) and alternative UCITS funds (+€3.4 bn) as well as bond funds (+€1.7 bn), commodity funds (+€1.5 bn), “other” funds (+€0.9 bn) and real estate funds (+€0.2 bn).

These fund flows added up to overall net inflows of €17.6 bn into long-term investment funds for April. ETFs contributed €0.5 bn to these inflows.

Money Market Products

After posting net outflows for February and March, money market funds were the best-selling asset type overall for April (+€10.6 bn). In line with 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 inflows of €28.2 bn for April and to estimated net inflows of €125.8 bn for the year 2018 so far.

Money Market Products by Sector

Money Market USD (+€8.2 bn) and Money Market EUR (+€8.8 bn) were the two best selling sectors overall. The third best selling money market sector for the month was Money Market EUR Leveraged (+€0.8 bn). At the other end of the spectrum Money Market GBP (-€4.1 bn) suffered the highest net outflows overall, bettered by Money Market AUD (-€0.1 bn) and Money Market CAD (-€0.01 bn). Comparing this flow pattern with the flow pattern for March showed that European investors rebuilt their positions in the U.S. dollar and further increased their positions in the euro, while decreasing the position they had built in the British pound sterling over 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, April 2018 (Euro Billions)

European Fund Flow Review April 2018

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Equity US (+€4.2 bn) was the best selling sector, followed by Equity Global (+€3.8 bn), Unclassified (+€1.7 bn), and Bond Emerging Markets in Local Currencies (+€1.5 bn) as well as Alternative Global Macro (+€1.4 bn).

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

European Fund Flow Review April 2018

Source: Thomson Reuters Lipper

At the other end of the spectrum Equity Europe (-€2.9 bn) suffered the highest net outflows from long-term mutual funds, bettered by Bond EUR Corporates (-€1.5 bn) and Bond USD High Yield (-€1.3 bn) as well as Equity Japan (-€1.3 bn) and Equity Eurozone (-€1.3 bn).

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

European Fund Flow Review April 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 April, with only 16 of the 34 markets covered in this report showing net inflows and 18 showing net outflows. France (+€17.0 bn)—driven by money market funds (+€14.5 bn)—was the fund domicile with the highest net inflows, followed by Luxembourg (+€7.3 bn), Ireland (+€4.5 bn), the United Kingdom (+€1.5 bn), and Sweden (+€0.7 bn).On the other side of the table Germany (-€1.1 bn) was the single fund domicile with the highest net outflows, bettered by the Netherlands (-€1.0 bn) and Finland (-€0.5 bn).

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

European Fund Flow Review April 2018

Source: Thomson Reuters Lipper

Within the bond sector, funds domiciled in Ireland (+€1.5 bn) led the table for April, followed by those domiciled in Luxembourg (+€1.0 bn), France (+€0.8 bn), Sweden (+€0.4 bn), and Germany (+€0.3 bn). Bond funds domiciled in the Netherlands (-€0.8 bn), Italy (-€0.6 bn), and Denmark (-€0.6 bn) stood at the other end of the table.

For equity funds, products domiciled in Ireland (+€3.7 bn) led the table for April, followed by funds domiciled in Luxembourg (+€1.5 bn), the United Kingdom (+€1.3 bn), and Belgium (+€0.6 bn) as well as Spain (+€0.1 bn). Meanwhile, Germany (-€2.1 bn), the Netherlands (-€0.2 bn), and Jersey (-€0.2 bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed-asset products Luxembourg (+€2.5 bn) was the domicile with the highest net inflows, followed by funds domiciled in Italy (+€1.2 bn), Germany (+€0.5 bn), Spain (+€0.3 bn), and the United Kingdom (+€0.2 bn). In contrast, France (-€0.2 bn), Jersey (-€0.1 bn), and Guernsey (-€0.04 bn) were the domiciles with the highest net outflows from mixed-asset funds.

France (+€1.9 bn) was the domicile with the highest net inflows into alternative UCITS funds for April, followed by Ireland (+€1.9 bn), Luxembourg (+€0.5 bn), and Sweden (+€0.2 bn) as well as Germany (+€0.1 bn). Italy   (-€1.0 bn), bettered by the United Kingdom (-€0.2 bn) and Poland (-€0.1 bn), stood at the other end of the table.

Fund Flows by Promoters

Amundi, with net sales of €4.0 bn, was the best selling fund promoter for April overall, ahead of Credit Mutuel (+€3.6 bn) and JP Morgan (+€2.9 bn).

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

European Fund Flow Review April 2018 

Source: Thomson Reuters Lipper

Considering the single-asset bases, UBS (+€1.2 bn) was the best selling promoter of bond funds, followed closely by Aviva (+€1.2 bn), BlackRock (+€0.8 bn), and Carmignac Gestion (+€0.6 bn) as well as Colchester (+€0.5 bn).

Within the equity space Robeco (+€1.4 bn) stood at the head of the table, followed closely by Vanguard Group (+€1.4 bn), UBS (+€1.0 bn), and KBC (+€0.6 bn) as well as Morgan Stanley (+€0.6 bn).

Eurizon Capital (+€1.5 bn) was the leading promoter of mixed-asset funds in Europe for April, followed by Allianz (+€1.3 bn), JP Morgan (+€0.6 bn), and Amundi (+€0.5 bn) as well as Union Investment (+€0.5 bn).

H2O Asset Management (+€1.7 bn) was the leading promoter of alternative UCITS funds for the month, followed by Insight (+€0.5 bn), Goldman Sachs (+€0.3 bn), and Payden & Rygel (+€0.3 bn) as well as JP Morgan (+€0.2 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €8.8 bn for April. With mixed-asset and equity funds dominating the overall sales numbers, the ranking of the asset types with regard to the ten best selling funds was somewhat surprising: equity funds (+€3.8 bn) dominated the sales table for the ten top single funds, followed by bond funds (+€2.2 bn) and “other” funds (+€1.7 bn).

Please note that the table of the ten best selling funds has been adapted because we witnessed some shifts within the AB FCP I-Global High Yield Portfolio funds over April, when investors sold the A-USD 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, April 2018 (Euro Millions)

European Fund Flow Review April 2018

Source: Thomson Reuters Lipper

Appendix

Below is a table with the flows for the AB FCP I-Global High Yield Portfolio funds. Because of the high net inflows, some of the share classes would have been included in the list of the ten best-selling funds for April.

Table 3: Money Flows into AB FCP I-Global High Yield Portfolio, April 2018 (Euro Millions)

European Fund Flow Review April 2018 

Source: Thomson Reuters Lipper

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