European Investors Withdrew From Equity Mutual Funds

Shanny Basar

European investors pulled €23.5bn ($26.3bn) from equity mutual funds in the first 11 months of last year despite markets ending higher.

Detlef Glow, head of EMEA research at Lipper, said in a report that mutual funds of European promoters had estimated overall inflows of €259.9bn at the end of November 2019.

However, flows were not driven by equity funds despite stock market gains – instead investors pulled €23.5bn over the first 11 months of last year.

Glow said: “A number of investors were still shocked by the massive downturn in equity markets in the fourth quarter of 2018, so those investors who wanted to participate from a rally at the beginning of the year started to sell their positions after the markets went up in January.”

Detlef Glow, Lipper

He added that outflows accelerated while the markets returned to their old high marks in March/April last year and expectations of a trade war between the US and China.

“As markets bounced back in June, investors returned to equities in July – just in time for the next downturn in equities – which might have eaten up the risk budgets of risk cautious investors and, therefore, caused a peak in outflows from equity funds in August,” he continued. “As the rally on the equity markets continued in September, October, and November, European investors found the confidence to buy equities to participate in these gains.”

European ETFs

In contrast, equities exchange-traded funds listed in Europe gathered  $36.63bn in the first 11 months of last year, slightly lower than the $37bn in net inflows in the same period in 2018 according to ETFGI, independent research and consultancy firm covering trends in the global ETFs/ETPs ecosystem.

Fixed income ETFs/ETPs listed in Europe gathered more assets year-on-year during the same period. Net  inflows for the year to November 2019 were $55.91bn, nearly four times the $14.43bn in net inflows that fixed income products had attracted for the year to November 2018.

In total assets invested in the European ETFs/ETPs industry grew 27.9% in the first 11 months of last year, which was greater than the 17.6% compound annual growth rate over the past 10 years.

Deborah Fuhr, managing partner, founder and owner of ETFGI, said in a statement: “During November the S&P 500 gained 3.6% as global markets were resistant to fears of inflation and showed optimism on the trade talks.  Global equities as measured by the S&P Global BMI were up 2.5% and the S&P Emerging BMI gained 0.1%.”

Fuhr continued that April 11 this year will mark the 20th anniversary of the listing of the first ETFs in Europe as assets have reached more than $1 trillion.

She said in a blog that ETF/ETP assets listed in Europe grew by by 33.8% from $767m to $1.03 trillion between 2018 and 2019.

Fuhr added: “At the end of December 2019, the European ETFs/ETPs industry had 2,198 ETFs/ETPs, with 8,401 listings, assets of US$1.027 trillion, from 70 providers listed on 27 exchanges.”

Fixed income ETFs in Europe gathered the largest net inflows last year with $61bn according to preliminary data from ETFGI. Equity funds followed with  $51.74bn and then commodities with $8.67bn.

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