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July 23, 2018

Monday Morning Memo: European Fund-Flow Trends June 2018 – Negative market sentiment takes a toll on mutual funds

by Detlef Glow.

European investors pulled back further from long-term mutual funds as the market environment and general sentiment turned negative. As a consequence, June was the second month posting net outflows from long-term mutual funds after 16 consecutive months showing net inflows. That said, European fund promoters still enjoyed net inflows into mixed-asset funds (+€3.4 bn), followed by real estate funds (+€1.1 bn) and commodity funds (+€0.2 bn). In contrast, bond funds (-€15.0 bn) were the asset type with the highest net outflows from long-term mutual funds for the second month in a row, bettered by equity funds (-€11.0 bn), “other” funds (-€0.6 bn), and alternative UCITS funds (-€0.1 bn).

These fund flows added up to overall net outflows of €22.0 bn from long-term investment funds for June. ETFs contributed €0.9 bn to these flows.

Money Market Products

Even though one would expect to see net inflows into money market funds in this kind of market environment, money market products faced a second month of net outflows (-€16.4 bn) for June. 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 €38.3 bn for June and to estimated net inflows of €59.8 bn for the year 2018 so far.

Money Market Products by Sector

Money Market EUR Leveraged (+€0.5 bn), Money Market USD (+€0.4 bn), and Money Market SEK (+€0.3 bn) were the best selling money market sectors. At the other end of the spectrum Money Market EUR (-€13.3 bn) suffered the highest net outflows overall, bettered by Money Market GBP (-€4.5 bn) and Money Market NOK  (-€0.1 bn). Comparing this flow pattern with the flow pattern for May showed that European investors further decreased their positions in the euro and also reduced their positions in the best selling money market category for May, money market GBP. 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, June 2018 (Euro Billions)

European Fund Flow Trends June 2018

Source: Thomson Reuters Lipper

Fund Flows by Sectors

Within the segment of long-term mutual funds Equity US (+€2.3 bn) was the best selling sector, followed by Mixed-Asset USD Balanced-US (+€1.5 bn), Mixed-Asset GBP Balanced (+€1.4 bn), and Alternative Equity Market Neutral (+€1.4 bn) as well as Equity Global (+€1.3 bn).

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

European Fund Flow Trends June 2018

Source: Thomson Reuters Lipper

At the other end of the spectrum Equity Emerging Markets Global (-€3.4 bn) suffered the highest net outflows from long-term mutual funds, bettered by Bond Global USD Hedged (-€2.7 bn) and Equity Europe (-€2.0 bn) as well as Bond Global High Yield (-€1.8 bn) and Absolute Return EUR Medium (-€1.8 bn).

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

European Fund Flow Trends June 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 June, with only 12 of the 34 markets covered in this report showing net inflows and 22 showing net outflows. Switzerland (+€1.2 bn) was the fund domicile with the highest net inflows, followed by Germany (+€0.9 bn), Belgium (+€0.2 bn), Liechtenstein (+€0.2 bn), and Sweden (+€0.1 bn).On the other side of the table France (-€15.8 bn) was the single fund domicile with the highest net outflows, bettered by Luxembourg  (-€13.6 bn) and Ireland (-€7.3 bn). It is noteworthy that the overall outflows in France were impacted by shifts in the money market segment (-€13.9 bn).

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

European Fund Flow Trends June 2018

Source: Thomson Reuters Lipper

Within the bond sector, funds domiciled in Switzerland (+€0.7 bn) led the table for June, followed by those domiciled in Denmark (+€0.6 bn), the United Kingdom (+€0.6 bn), Sweden (+€0.3 bn), and Norway (+€0.1 bn). Bond funds domiciled in Luxembourg (-€10.1 bn), Ireland (-€3.5 bn), and France (-€0.9 bn) stood at the other end of the table.

For equity funds, products domiciled in Germany (+€0.4 bn) led the table for June, followed by funds domiciled in Spain (+€0.3 bn), the Netherlands (+€0.2 bn), and Liechtenstein (+€0.1 bn) as well as Jersey (+€0.01 bn). Meanwhile, Luxembourg (-€4.7 bn), Ireland (-€2.6 bn), and France (-€1.8 bn) were the domiciles with the highest net outflows from equity funds.

With regard to mixed-asset products Luxembourg (+€1.5 bn) was the domicile with the highest net inflows, followed by funds domiciled in Ireland (+€0.8 bn), Germany (+€0.4 bn), Belgium (+€0.4 bn), and Spain (+€0.2 bn). In contrast, France (-€0.3 bn), the Netherlands (-€0.1 bn), and Italy (-€0.03 bn) were the domiciles with the highest net outflows from mixed-asset funds.

France (+€1.1 bn) was the domicile with the highest net inflows into alternative UCITS funds for June, followed by Ireland (+€0.6 bn), Luxembourg (+€0.3 bn), and Germany (+€0.1 bn) as well as Spain (+€0.01 bn). Italy (-€1.0 bn), bettered by the United Kingdom (-€0.8 bn) and Sweden (-€0.3 bn), stood at the other end of the table.

Fund Flows by Promoters

Goldman Sachs, with net sales of €3.9 bn, was the best selling fund promoter for June overall, ahead of Generali (+€3.0 bn) and Morgan Stanley (+€1.7 bn). It is noteworthy that the overall net sales of Goldman Sachs (+€3.9 bn) and Generali (+€2.9 bn) were driven by their net sales in the money market segment.

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

European Fund Flow Trends June 2018

Source: Thomson Reuters Lipper

Considering the single-asset bases, Danske (+€1.0 bn) was the best selling promoter of bond funds, followed by Vanguard (+€0.6 bn), Societe Generale (+€0.5 bn), and Morgan Stanley (+€0.4 bn) as well as Swisscanto (+€0.3 bn).

Within the equity space Morgan Stanley (+€1.2 bn) stood at the head of the table, followed by Old Mutual (+€0.8 bn), AB (+€0.5 bn), and Pictet (+€0.5 bn) as well as Goldman Sachs (+€0.5 bn).

Allianz (+€1.5 bn) was once again the leading promoter of mixed-asset funds in Europe for June, followed by Mercer (+€1.2 bn), Union Investment (+€0.5 bn), and JP Morgan (+€0.4 bn) as well as Schroders (+€0.4 bn).

H2O Asset Management (+€1.2 bn) was once again the leading promoter of alternative UCITS funds for the month, followed by Old Mutual (+€0.6 bn), JP Morgan (+€0.4 bn), and BMO (+€0.3 bn) as well as Man Investments (+€0.3 bn).

Best Selling Funds

The ten best selling long-term funds gathered at the share-class level total net inflows of €8.5 bn for June. Since bond and equity funds had the highest overall net outflows for the month, it was surprising that these asset types—equity funds (+€3.7 bn) and bond funds (+€2.2 bn)—dominated the sales table for the ten top single funds for June, followed by alternative UCITS funds (+€1.3 bn) and mixed-asset funds (+€1.3 bn).

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

European Fund Flow Trends June 2018

Source: Thomson Reuters Lipper

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