by Detlef Glow.
European investors pulled back further from long-term mutual funds as the market environment and general sentiment stayed negative. As a consequence August was the fourth month in a row 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 (+€2.3 bn) and real estate funds (+€0.5 bn), while all other asset types in the segment of long-term mutual funds witnessed net outflows: bond funds (-€7.4 bn), alternative UCITS funds (-€2.5 bn), “other” funds (-€0.6 bn), and commodity funds (-€0.6 bn) as well as equity funds (-€0.4 bn).
These fund flows added up to overall net outflows of €8.7 bn from long-term investment funds for August. ETFs contributed inflows of €2.3 bn to these flows.
Money Market Products
Within this environment even money market products, which are often seen as safe-haven products, witnessed net outflows of €7.1 bn for August. In line with their actively managed peers ETFs investing in money market instruments posted net outflows of €0.1 bn.
This flow pattern led the overall fund flows to mutual funds in Europe to overall net outflows of €15.8 bn for August and to estimated net inflows of €44.2 bn for the year 2018 so far.
Money Market Products by Sector
Money Market USD (+€1.8 bn) and Money Market EUR Leveraged (+€0.2 bn) were the best selling money market sectors overall, followed by Money Market CHF (+€0.2 bn). At the other end of the spectrum Money Market EUR (-€6.3 bn) suffered the highest net outflows overall, bettered by Money Market GBP (-€3.2 bn) and Money Market SEK (-€0.1 bn). Comparing this flow pattern with the flow pattern for July showed that European investors reduced their positions in the GBP and the euro while they further built up their positions in 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, August 2018 (Euro Billions)
Fund Flows by Sectors
Within the segment of long-term mutual funds Equity US (+€2.3 bn) was once again the best selling sector, again followed by Mixed-Asset USD Balanced-US (+€2.2 bn). Equity Global (+€1.9 bn) was the third best selling sector, followed by Equity Sector Healthcare(+€1.3 bn) and Bond USD Government (+€1.3 bn).
Graph 2: Ten Top Sectors, August 2018 (Euro Billions)
At the other end of the spectrum Bond EUR Short Term (-€2.2 bn) suffered the highest net outflows from long-term mutual funds, bettered by Equity Japan (-€1.8 bn) and Bond Global (-€1.5 bn) as well as Bond Emerging Markets in Hard Currencies (-€1.1 bn) and Equity Emerging Markets Global (-€1.0 bn).
Graph 3: Ten Bottom Sectors, August 2018 (Euro Billions)
Fund Flows by Markets (Fund Domiciles)
Single fund domicile flows (including those to money market products) showed in general a negative picture for August, with only 8 of the 34 markets covered in this report showing net inflows and 26 showing net outflows. Germany (+€1.3 bn) was the fund domicile with the highest net inflows, followed by Sweden (+€0.8 bn), Switzerland (+€0.7 bn), Isle of Man (+€0.2 bn), and Guernsey (+€0.03 bn).On the other side of the table Luxembourg (-€7.6 bn) was the single fund domicile with the highest net outflows, bettered by Ireland (-€4.3 bn) and France (-€2.5 bn).
Graph 4: Estimated Net Sales by Fund Domiciles, August 2018 (Euro Billions)
Within the bond sector, funds domiciled in Switzerland (+€1.1 bn) led the table for August, followed by those domiciled in Sweden (+€0.3 bn), the United Kingdom (+€0.2 bn), Liechtenstein (+€0.1 bn), and Norway (+€0.1 bn). Bond funds domiciled in Luxembourg (-€4.4 bn), Ireland (-€2.1 bn), and Spain (-€0.6 bn) stood at the other end of the table.
For equity funds, products domiciled in Ireland (+€1.3 bn) led the table for August, followed by funds domiciled in Germany (+€0.7 bn), Sweden (+€0.5 bn), and the United Kingdom (+€0.2 bn) as well as Italy (+€0.2 bn). Meanwhile, Luxembourg (-€1.4 bn), Switzerland (-€1.1 bn), and Finland (-€0.4 bn) were the domiciles with the highest net outflows from equity funds.
With regard to mixed-asset products Germany (+€1.2 bn) was the domicile with the highest net inflows, followed by funds domiciled in Luxembourg (+€0.9 bn), the United Kingdom (+€0.2 bn), Belgium (+€0.2 bn), and Switzerland (+€0.2 bn). In contrast, Italy (-€0.2 bn), France (-€0.2 bn), and Jersey (-€0.1 bn) were the domiciles with the highest net outflows from mixed-asset funds.
France (+€0.5 bn) was the domicile with the highest net inflows into alternative UCITS funds for August, followed by Isle of Man (+€0.2 bn) and Denmark (+€0.04 bn) as well as the Netherlands (+€0.04 bn) and Germany (+€0.04 bn). The United Kingdom (-€1.3 bn), bettered by Luxembourg (-€0.7 bn) and Italy (-€0.7 bn), stood at the other end of the table.
Fund Flows by Promoters
Insight, with net sales of €2.2 bn, was the best selling fund promoter for August overall, ahead of Natixis (+€1.7 bn) and Vanguard Group (+€1.4 bn).
Table 1: Ten Best Selling Promoters, August 2018 (Euro Billions)
Considering the single-asset bases, Bank of America (+€1.0 bn) was the best selling promoter of bond funds, followed by Vanguard Group (+€0.6 bn), Royal London (+€0.5 bn), and Eastspring (+€0.5 bn) as well as BlueBay (+€0.3 bn).
Within the equity space BlackRock (+€1.6 bn) stood at the head of the table, followed by Vanguard Group (+€0.9 bn), AllianceBernstein (+€0.4 bn), and Fundsmith (+€0.4 bn) as well as Deka (+€0.4 bn).
Allianz (+€2.1 bn) was once again the leading promoter of mixed-asset funds in Europe for August, followed by UniCredit (+€0.6 bn), Union Investment (+€0.4 bn), and Eurizon Capital (+€0.3 bn) as well as Janus Henderson (+€0.2 bn).
H2O Asset Management (+€0.5 bn) was once again the leading promoter of alternative UCITS funds for the month, followed by Canada Life (+€0.2 bn), Societe Generale (+€0.2 bn), and BlackRock (+€0.2 bn) as well as AQR Capital Management (+€0.2 bn).
Best Selling Funds
The ten best selling long-term funds gathered at the share-class level total net inflows of €8.2 bn for August. Since mixed-asset funds had the highest overall net inflows for the month, it was surprising that only one mixed-asset fund was in the sales table for the ten top single funds for August, while bond funds (+€5.0 bn) and equity funds (+€2.5 bn) dominated the list of the best selling funds.
Table 2: Ten Best Selling Long-Term Funds, August 2018 (Euro Millions)