Brexit influences returns from Danish funds

Jonathan Boyd
Brexit influences returns from Danish funds

Data from the Danish Investment Fund Association (Investeringsfondsbranschen ‘IFB’) suggest the local funds market was directly effected by the fallout from the Brexit vote in the UK, as funds invested in Danish bonds saw gains through the month.

Emerging markets were another sector that gained, but many equity funds lost money, IFB noted, particularly as there were a number of stock markets that fell through the month across Europe.

“In the wake of the British referendum many investors fled to safer government bonds. That meant that yields on Danish government bonds fell 0.2%-0.3%. Securities from emerging markets were the month’s big winners, with strong gains from both equities and bonds,” IFB wrote in its monthly update.

Funds focused on Danish equity on average shed 5.5% of their value in June, while European and global equity funds shed 5.1% and 1% respectively. Funds of North American equities returned 0% through the month, but emerging markets equity funds returned 3.4% on average.

Funds of short-term Danish bonds returned 0.3%, but funds of longer dated Danish bonds returned 1.6%. Emerging markets bond funds typically returned 3.9%, but funds with investment grade and non-investment grade bonds returned 0.9% and -0.1% respectively – in DKK terms.

First half

The turmoil of June sparked by the Brexit vote did not deter a rise in the number of new retail investors buying funds in Denmark. Over the first half some 20,000 additional such investors came to the market, taking the total in the country to 810,000. The number of retail investors in funds has been rising in Denmark continously since November 2014, IFB said.

The first half of 2016 saw investors receive dividends totalling DKK33.9bn (€4.6bn) of which a portion has been reinvested and has been counted as part of the industry’s net sales. Retail investors’ total assets rose to DKK752bn (€101bn) by the end of June, as total industry assets rose to DKK1.862trn (€250.4bn).

As the charts published by IFB show, bond fund sectors tended to provide positive returns through the year to date, but a number of equity fund sectors have provided negative returns.