European asset managers suffered the worst month for fund flows in five years throughout June, according to Morningstar data.
Data from Morningstar Direct to month-end June showed that European-domiciled funds, both open-ended and ETFs, suffered significant overall net outflows throughout the month as investors continued their risk aversion trend. Bond funds suffered outflows of nearly €11bn across the industry, while equity funds saw around €6bn exit in June, marking the worst month for Europe’s fund industry flow-wise since June 2013.
Across asset classes, investors sold out of equity funds across regions, particularly shying away from Japan (€1.6bn in outflows), Europe (€1.5bn in outflows), and emerging markets (€3.3bn in outflows across debt and equity). Healthy earnings growth and ongoing fiscal spending in the U.S. saw continued optimism for US equities however, with investors putting money into US large-cap equity funds, global growth and technology funds. On the fixed income side, high yield bond funds were sold off as investors looked to de-risk their portfolios.
Overall long-term funds suffered net outflows of €10.5bn in June, with actively managed funds contributing around €2.5bn of the outflows. June marked the first negative month for equity trackers since May 2016, with over €3.6bn in outflows. Allocation funds saw positive inflows, but at the lowest levels in a one-month period since December 2016. Active bond funds did not fare as well as passive fixed income products in June, shedding around €13.2bn.
Ali Masarwah, director, EMEA Editorial Research at Morningstar, commented: “Widespread selling of riskier assets was a dominant feature across the European fund market in June, contributing to a reversal of fortunes for the asset management industry. After market volatility staged a comeback in February, asset flows to European domiciled funds progressively slowed down until April and dipped into negative terrain in May and June. This marks a sharp reversal following the year of record inflows during 2017.
“Despite widespread caution however, there were some bright spots with investors seeing potential across U.S. equities and the technology sector. This suggests that investors remain confident that healthy earnings growth is likely to continue in US, while taking a decidedly more cautious stand on the rest of the world.”