European Fund Flows Total €10 Billion – Highest Since February Market Highs - European Funds Insight

With what is, hopefully, the worst of the health component part of the COVID-19 crisis behind them, European governments are now making plans for relaxing lockdowns. The worst hit countries – Italy, Spain, France and the UK – are still weeks away from re-opening, but other countries such as Austria, Switzerland and the Nordic countries have seen significantly reduced infections and are now initiating plans to gradually open non-essential businesses.

Investments totalling €10 billion were made into European funds in the week ended April 15. All asset classes saw inflows during the week – net sales inflow into equity funds was €4.2 billion and bond funds experienced the first net sales inflow in six weeks with €3.9 billion; mixed asset funds saw a net sales inflow of €865 million. Alternatives saw an inflow of €1.2 billion, breaking a seven-week trend of outflows, although this was due to an approximately €3 billion net inflow into a single fund, rather than an increase in demand for the asset class.

Passive Flows Highlight Retail and Institutional Investor Behaviour

Passive mutual funds and ETFs also saw inflows in all asset classes with €1 billion and €3 billion, respectively during the week ended April 15. Equity passives generated the highest net flows at €672 million while equity ETFs saw a modest inflow of €284 million. Conversely, bond ETFs experienced an inflow of €1.9 billion during the week, the record high since markets peaked in mid-February; passive bond funds had a lower inflow of €240 million. In Europe, passive funds tend to be used by retail investors and ETFs have a higher institutional base; through this we can infer retail investors preference for equity and institutional investor preference for fixed income.

Figure 1: Positive Inflows Into All Asset Classes (Weekly Data, In Billions of €)

*Data as at April 15th 2020 sourced from ISS MI Simfund.

Sector Breakdown

A Glimmer of Hope?

Europe is far from clear of COVID-19, but with some countries relaxing lockdown and new cases falling in the worst hit countries there is some light at the end of the tunnel. The asset management industry has some way to go to recover the assets lost in the downturn. European industry AUM fell by approximately 20% from mid-February to mid-March, but with €10 billion in net sales in the week ended April 15 and positive market returns industry AUM has recovered by 5% as at April 15. The recovery will, however, be led by positive fund returns, the effect of which far outweigh sales.