European Fund Insights - 12 June 2020

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Assets under management (AUM) tracked in the ISS MI Simfund’s weekly dataset have grown to €7.7 trillion as at the week ended June 3rd — just 9% below the record high observed in the week ended January 22nd.

European AUM fell 21% from €8.4 trillion in January to €6.6 trillion in mid-March. Since that low point, AUM has rallied 16% through a combination of positive net sales flows and fund performance. Net sales flows in the week ended June 3rd reached €15.5 billion, the highest weekly inflow since January. Fixed income funds were once again the most popular asset class, with €9.5 billion in net sales flows. Equity funds saw a net sales inflow of €3.5 billion and mixed asset funds an inflow of €1.7 billion. Furthermore, fixed income and equity ETFs witnessed net sales of €3.1 billion and €2.3 billion, respectively.

In the period from April 1st to June 3rd European investors have made net contributions of €53 billion to European funds. Fixed income was by far the best-selling asset class, with €39 billion in net sales. Equity funds, which have outperformed fixed income since April 1st, experienced net sales of €12 billion, while mixed-asset funds saw net sales of €8.5 billion.

Passive funds and ETFs have been a mixed bag. Fixed income passives and ETFs have achieved net sales of €5.6 billion and €16.7 billion, respectively in the period from April 1st to June 3rd. However, equity passive funds have seen a net sales outflow of €4.7 billion over the same period, while equity ETFs have achieved net sales of just €503 million.

ESG Funds Remain Popular Throughout The COVID-19 Crisis

Environmental, Social and Governance (ESG) focused strategies have continued to attract investors. From April 1st to June 3rd European investors allocated a net €18.9 billion to ESG funds. Again, fixed income proved to be the most popular, with €8.6 billion in net sales, followed by Equity funds, with net sales of €7.4 billion and mixed asset net sales of €3.1 billion.

Figure 1: Highest Net Sales Inflow in Five Months (Weekly data in billions of €)

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*Data as at June 3, 2020 sourced from ISS MI Simfund.

Sector Breakdown

European investors continue to look globally for their investment returns; Global Bonds and Global Equities top their respective asset class sales lists, with net sales of €4.6 billion and €3.3 billion, respectively. High yield bonds, which also has a global tint to the strategy, has been featured in the top three for several weeks. The ECB announced an increase to its bond buying program this week, and we will monitor any improvements in European strategy flows.

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*Tables do not add up to 100% due to some sectors being removed.

*Data as at June 3, 2020 sourced from ISS MI Simfund.

A sign of relief for asset management employees

An increase in AUM is good news for the industry and its 110,000 employees. With AUM just 9% off the record high observed in January and trending positively, asset manager fees will recover accordingly, which should, in turn, allay employment concerns at European firms. With job losses across many industries, stemming job losses in asset management and the wider eco-system will help the post- COVID-19 economic recovery.