Monday memo: European fund flow trends, November 2019

It seems like the concerns of European investors regarding general economic growth and, therefore, declining earnings, are gone. This is in spite of continued uncertainty over Brexit and the trade war between China and the US As a result, November was the ninth month during which long-term mutual funds posted net inflows this year. Equity funds (+€24bn) were the best-selling asset type in the segment of long-term mutual funds, followed by mixed-assets funds (+€7.6bn), bond funds (+€5.8bn), and real estate funds (+€0.8bn). Conversely, "other" funds (-€2.5bn), alternative UCITS funds (-€1.5bn), and commodity funds (-€0.001bn) faced outflows.

These fund flows added up to overall net inflows of €34.2bn into long-term investment funds for November. ETFs contributed inflows of €15.4bn to these flows.

Money Market Products

The current market environment led European investors to buy money market products. As a result, money market funds were witnessing net inflows of €2.7bn for November. ETFs investing in money market instruments contributed net inflows of €0.02bn to the total, in line with their actively managed peers.

This flow pattern led to overall net inflows of €36.9bn for November, and inflows of €259.9bn for mutual funds in Europe to date this year.

Money Market Products by Sector

Money Market USD (+€17.6bn) was the best-selling sector overall, followed by Money Market CHF (+€0.1bn) and Money Market PLN (+€0.04bn). At the other end of the spectrum, Money Market EUR (-€10.7bn) suffered once again the highest net outflows overall, bettered by Money Market GBP (-€3.1bn) and Money Market EUR Leveraged (-€0.3bn).

Comparing this flow pattern with the flow pattern for October revealed that European investors built up their positions in the dollar while further selling money market EUR and reducing money market GBP. In conjunction with the asset allocation decisions of portfolio managers, these shifts might have also been caused by corporate actions 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, November 2019 (Euro Billions)

Source: Lipper from Refinitiv

Fund flows by dectors

In line with the general fund flows trend, Equity Global (+€6.9bn) was the best-selling sector in the segment of long-term mutual funds, followed by Equity Emerging Markets Global (+€5.2bn). Bond Global USD (+€3.1bn) was the third best-selling long-term sector, followed by Alternative Multi Strategies (+€2.7bn) and Bond EUR Corporates (+€2.9bn).

Graph 2: Ten Top Sectors, November 2019 (Euro Billions)

Source: Lipper from Refinitiv

At the other end of the spectrum, Absolute Return Bond EUR (-€4.3bn) suffered the highest net outflows in the segment of long-term funds, bettered by Bond EUR Short Term (-€2.6bn), Bond Global GBP (-€2.1bn), Guaranteed products (-€1.8bn), and Target Maturity MA EUR 2035 (-€1.6bn).

Graph 3: Ten Bottom Sectors, November 2019 (Euro Billions)

Source: Lipper from Refinitiv

Fund Flows by Markets (Fund Domiciles)

Single-fund domicile flows (including those to money market products) showed, in general, a mixed picture for November. Seventeen of the 34 markets covered in this report showed net inflows and 17 showed net outflows. Ireland (+€28.5bn) was the fund domicile with the highest net inflows, followed by Luxembourg (+€17.4bn), Switzerland (+€4.8bn), Germany (+€2. bn), and the Netherlands (+€1bn). On the other side of the table, France (-€16.3bn) was the fund domicile with the highest outflows, bettered by the UK (-€1.6bn) and Jersey (-€0.8bn). It is noteworthy that the fund flows for France (-€8.6bn), Luxembourg (+€7bn), and Ireland (+€6.9bn) were impacted by flows in and out of money market products.

Graph 4: Estimated Net Sales by Fund Domiciles, November 2019 (Euro Billions)

Source: Lipper from Refinitiv

Within the bond sector, funds domiciled in Ireland (+€9.9bn) led the table, followed by Luxembourg (+€1.8bn), Switzerland (+€1.6bn), Belgium (+€0.5bn), and Liechtenstein (+€0.3bn). Bond funds domiciled in France (-€6.3bn), the U.K. (-€0.7bn), and Denmark (-€0.7bn) were at the other end of the table.

For equity funds, products domiciled in Ireland (+€10.1bn) led the table for November, followed by funds domiciled in Luxembourg (+€7.2bn), Belgium (+€1.6bn), the U.K. (+€1.6bn), and Switzerland (+€1.2bn). Meanwhile, France (-€0.3bn), Finland (-€0.2bn), and Norway (-€0.2bn) were the domiciles with the highest net outflows from equity funds.

Regarding mixed-assets products, Switzerland (+€1.4bn) was the domicile with the highest net inflows, followed by funds domiciled in Luxembourg (+€1.2bn), Spain (+€1bn), the UK (+€0.8bn), and Germany (+€0.8bn). In contrast, France (-€0.6bn), Jersey (-€0.04bn), and Liechtenstein (-€0.03bn) were the domiciles with the highest net outflows from mixed-assets funds.

Ireland (+€0.8bn) was the domicile with the highest net inflows into alternative Ucits funds for November, followed by Luxembourg (+€0.7bn) and France (+€0.1bn). Meanwhile, the UK (-€2.4bn), Italy (-€0.8bn), and the Netherlands (-€0.1bn) were at the other end of the table.

Fund Flows by Promoters

BlackRock was the best-selling fund promoter for November overall, with net sales of €11.6bn, ahead of JPMorgan (+4.7bn) and Credit Suisse Group (+€4.3bn).

Table 1: Ten Best-Selling Promoters, November 2019 (Euro Billions)

Source: Lipper from Refinitiv

Considering the single-asset classes, BlackRock (+€2.7bn) was the best-selling promoter of bond funds, followed by PIMCO (+€1.9bn), Credit Suisse Group (+€1.6bn), Vanguard Group (+€1.3bn), and KBC (+€1.3bn).

Within the equity space, BlackRock (+€6.2bn) led the table, followed by UBS (+€2.1bn), Credit Suisse Group (+€1.8bn), DWS Group (+€1.6bn), and Mercer (+€1.5bn).

Eurizon Capital (+€1.8bn) was the leading promoter of mixed-assets funds in Europe, followed by Credit Suisse Group (+€0.7bn), Flossbach von Storch (+€0.6bn), JP Morgan (+€0.6bn), and Vanguard Group (+€0.6bn).

DWS Group (+€1.1bn) was the leading promoter of alternative Ucits funds for the month, followed by Fundrock (+€0.5bn), Fideuram (+€0.4bn), Aegon (+€0.4bn), and H2O Asset Management (+€0.4bn).

Best-Selling Funds

The 10 best-selling long-term funds, gathered at the share class level, amounted to €12.8bn of estimated net inflows for November. The general fund-flows trend for the 10 best-selling funds was not in line with the overall fund flows trend in Europe, as bond funds dominated the ranking of the asset types with regard to the 10 best-selling funds (+€5.6bn), followed by equity funds (+€5.2bn).

Table 2: Ten Best-Selling Long-Term Funds, November 2019 (Euro Millions)