by Detlef Glow.
European investors pulled further away from long-term mutual funds as the market environment and general sentiment remained negative. As a consequence October was the sixth month in a row posting net outflows from long-term mutual funds after 16 consecutive months showing net inflows. Real estate funds (+€0.3 bn) and commodity funds (+€0.2 bn) enjoyed net inflows, while all the other asset types in the segment of long-term mutual funds witnessed net outflows: bond funds (-€40.7 bn), equity funds (-€31.2 bn), alternative UCITS funds (-€11.4 bn), and mixed asset funds (-€9.1 bn), as well as ”other” funds (-€0.9 bn).
These fund flows added up to overall net outflows of €92.8 bn from long-term investment funds for October. ETFs contributed inflows of €0.7 bn to these flows.
Money Market Products
After a month with high outflows it seems that European investors returned to safe-haven money market products, which witnessed net inflows of €44.2 bn for October. In-line with their actively managed peers, ETFs investing in money market instruments contributed net inflows of €0.5 bn to these flows.
This flow pattern led the overall fund flows to mutual funds in Europe to overall net outflows of €48.6 bn for October and to estimated net outflows of €43.0 bn for the year 2018 so far.
Money Market Products by Sector
Money Market EUR (+€23.9 bn), Money Market USD (+€11.1 bn) followed by Money Market GBP (+€6.4 bn) and Money Market Global (+€1.5 bn), as well as Money Market SEK (+€1.1 bn) were the five best selling sectors overall for October. At the other end of the spectrum Money Market CHF (-€.25 bn) suffered the highest net outflows overall, bettered by Money Market SGD (-€0.02 bn) and Money Market HUF (-€0.01 bn). Comparing this flow pattern with the flow pattern for September showed that European investors rebuilt their positions in the euro and the U.S. dollar and further increased their positions in Sterling. These shifts might have been caused by asset allocation decisions as well as for other reasons such as cash dividends or cash payments, since money market funds are also used by corporations as replacements for cash accounts.
Graph 1: Estimated Net Sales by Asset Type, October 2018 (Euro Billions)
Fund Flows by Sectors
Within the segment of long-term mutual funds Bond USD Medium Term (+€1.0 bn) was the best selling sector, followed by Bond USD Government (+€0.9 bn). Bond GBP Corporates (+€0.6 bn) was the third best selling sector, followed by Equity UK (+€0.5 bn) and Mixed-Asset USD Balanced-US (+€0.5 bn).
Graph 2: Ten Top Sectors, October 2018 (Euro Billions)
At the other end of the spectrum Equity US (-€7.9 bn) suffered the highest net outflows from long-term mutual funds, bettered by Bond USD (-€6.1 bn) and Equity Global (-€5.4 bn) as well as Bond Global (-€4.7 bn) and Alternative Credit Focus (-€3.6 bn).
Graph 3: Ten Bottom Sectors, October 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 October, with only 8 of the 34 markets covered in this report showing net inflows and 26 showing net outflows. France (+€6.1 bn) was the fund domicile with the highest net inflows, followed by Belgium (+€1.0 bn), Ireland (+€0.5 bn), Isle of Man (+€0.2 bn), and the Netherlands (+€0.2 bn). On the other side of the table was Luxembourg (-€47.9 bn) the fund domicile with the highest outflows, which was bettered by Germany (-€1.7 bn) and Italy (-€1.5 bn).
Graph 4: Estimated Net Sales by Fund Domiciles, October 2018 (Euro Billions)
Within the bond sector, funds domiciled in Sweden (+€0.1 bn) led the table for October, followed by those domiciled in Liechtenstein (+€0.03 bn), and Poland (+€0.01 bn). Bond funds domiciled in Luxembourg (-€28.2 bn), Ireland (-€5.5 bn), and France (-€2.1 bn) stood at the other end of the table.
For equity funds, products domiciled in the United Kingdom (+€1.1 bn) led the table for October, followed by funds domiciled in Switzerland (+€0.6 bn), the Netherlands (+€0.4 bn), and Norway (+€0.1 bn) as well as Spain (+€0.1 bn). Meanwhile, Luxembourg (-€21.6 bn), Ireland (-€3.7 bn), and Belgium (-€3.5 bn) were the domiciles with the highest net outflows from equity funds.
With regard to mixed-asset products Switzerland (+€0.2 bn) was the domicile with the highest net inflows, followed by funds domiciled in Belgium (+€0.1 bn), Denmark (+€0.1 bn), Austria (+€0.03 bn), and the Czech Republic (+€0.01 bn). In contrast, Luxembourg (-€6.8 bn), France (-€1.6 bn), and Italy (-€0.5 bn) were the domiciles with the highest net outflows from mixed-asset funds.
Isle of Man (+€0.2 bn) was the domicile with the highest net inflows into alternative UCITS funds for October, followed by Denmark (+€0.01 bn). Luxembourg (-€6.3 bn), bettered by Ireland (-€2.3 bn) and the United Kingdom (-€1.8 bn), stood at the other end of the table.
Fund Flows by Promoters
JP Morgan, with net sales of €7.8 bn, was the best selling fund promoter for October overall, ahead of Legal & General (+€6.6 bn) and Deutsche Bank (+€2.7 bn). It is noteworthy that the flows of these promoters were driven by money market funds.
Table 1: Ten Best Selling Promoters, October 2018 (Euro Billions)
Considering the single-asset bases, UBS (+€2.8 bn) was the best selling promoter of bond funds, followed by Insight (+€1.0 bn), Vanguard Group (+€0.8 bn), and Bank of America (+€0.6 bn) as well as VanEck (+€0.3 bn).
Within the equity space Investec (+€1.4 bn) stood at the head of the table, followed by State Street (+€0.7 bn), Royal London (+€0.7 bn), and Societe Generale (+€0.6 bn) as well as Deka (+€0.5 bn).
Allianz (+€0.3 bn) was once again the leading promoter of mixed-asset funds in Europe, followed by Union Investment (+€0.3 bn), La Caixa (+€0.3 bn), and Danske (+€0.1 bn) as well as Smith & Williamson (+€0.1 bn).
H2O Asset Management (+€0.6 bn) was once again the leading promoter of alternative UCITS funds for the month, followed by Canada Life (+€0.2 bn), PIMCO (+€0.1 bn), and LRI (+€0.1 bn) as well as Deutsche Bank (+€0.1 bn).
Best Selling Funds
The ten best selling long-term funds gathered at the share-class level total net inflows of €8.7 bn for October. Since only real estate and commodity funds enjoyed net inflows for the month, it was surprising that the sales table for the ten top single funds for October was dominated by bond funds (+€5.1 bn), the asset type with the highest outflows overall.
Table 2: Ten Best Selling Long-Term Funds, October 2018 (Euro Millions)