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Even though the European mutual funds industry enjoyed overall record net inflows of €367.6 billion into mutual funds over the course of the year 2014, it seems the industry was still in a consolidation mode at the product level.

During fourth quarter 2014 the European fund industry created 475 new funds, but there were 453 funds liquidated and 271 merged during the same period. This meant the fund universe in Europe declined by 249 funds during the fourth quarter. Over the full course of 2014 a total of 2,821 funds (1,699 liquidations and 1,122 mergers) were withdrawn from the European fund market, while only 2,218 new products were launched. This meant the overall European mutual fund universe shrank by 603 primary funds during the year 2014.

Figure 1  Launches, Liquidations, and Mergers of Investment Funds in Europe

15 03 02 Graph 1

Source: Lipper, a Thomson Reuters company

As shown in Figure 1, the numbers of launches, liquidations, and mergers during Q4 2014 were in line with the long-term market trend established in Q1 2012.

Year-on-Year Comparison

The quantity of newly launched funds (2,218) for 2014 was nearly flat compared with the number of launches for 2013 (2,224) and 2012 (2,200). Compared with the peak in 2010, the number of newly launched products for 2014 showed a decrease of around 33%.

Figure 2  Overview of New Fund Launches, Mergers, and Closures of Investment Funds

15 03 02 Graph 2

Source: Lipper, a Thomson Reuters company

On the other hand, the number of liquidations went down approximately 15%, comparing 2013 with 2014—from 2,010 to 1,699, which was the lowest number of liquidations in the five-year observation period.

During the same period the number of fund mergers went down slightly—approximately 5%, from 1,185 for 2013 to 1,122 for 2014. Even the numbers of fund liquidations and mergers went down. The overall shrinkage in the number of funds for 2014 signalled that the industry was still consolidating its product ranges.

A Closer Look at Promoter Activity

The year 2014 witnessed the launch of 2,218 funds: 770 equity funds, 562 bond funds, 619 mixed-asset funds, 225 “other” funds, and 42 money market funds. During the same period 1,699 funds were liquidated: 488 equity funds, 302 bond funds, 377 mixed-asset funds, 438 “other” funds, and 94 money market funds.

Over the course of 2014, 1,122 funds were merged: 372 equity funds, 330 bond funds, 271 mixed-asset funds, 41 “other” funds, and 108 money market funds.

Figure 3  Overview of New Fund Launches, Mergers, and Closures for 2014

15 03 02 Graph 3

Source: Lipper, a Thomson Reuters company

Q4 2014 witnessed the launch of 475 funds: 180 equity funds, 109 bond funds, 137 mixed-asset funds, 42 “other” funds, and 7 money market funds. During the same period 453 funds were liquidated: 125 equity funds, 84 bond funds, 99 mixed-asset funds, 108 “other” funds, and 37 money market funds.

For Q4 2014, 271 funds were merged: 113 equity funds, 80 bond funds, 50 mixed-asset funds, 13 “other” funds, and 15 money market funds.

The net size of the European fund universe decreased since Q2 2011. Q4 2014 showed a net decrease of 249 products.

Summary

The trend of lower activity in setting up new funds we had noticed since the peak in 2010 stopped; the industry launched a similar number of new products over the last three years. In parallel, the number of mergers and liquidations went down. This might have been the result of a successful revision of fund ranges, combined with common consolidation efforts. That said, it seems fund promoters in Europe are still continuing their product offerings and liquidating or merging funds that do not have a sufficient amount in assets under management or are not seeing enough client demand. In addition, the further consolidation of the European asset management industry in terms of mergers of promoters is another driver for the consolidation of product ranges. On the other hand, the stable activity in terms of fund launches might be an indicator of stable demand for new products by investors, since their chase for yield may have made them more open to new (alternative) investment strategies.

If the general market conditions stay in favour of investors, i.e., if no negative trend hits the stock markets, we expect the European fund industry will show net growth in terms of new funds at some point in 2015. That will depend on there being no external events that interrupt the recovery of the markets or the trust of European investors in mutual funds.
The views expressed are the views of the author, not necessarily those of Thomson Reuters.

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Detlef Glow

Detlef Glow is Head of EMEA Research at Lipper, a Thomson Reuters flagship brand. In this position he is responsible for the Lipper research reports on the European ETF industry and special research reports on newsworthy market topics. Besides these tasks, he is acting as spokesperson for Lipper on TV and in print media, as well at conferences and expert panels. Detlef joined Lipper in mid 2005 from Feri Wealth Management, where he was Director of Portfolio Management, managing segregated accounts for high net worth individuals (HNWI). Prior to this he spent nine years with Tecis Holding AG, most recently as Head of Fund Research for Tecis Asset Management AG. In this role he was responsible for the quantitative and qualitative fund research for the Tecis fund of funds, the HNWI accounts and the recommendation list of funds for the financial adviser arm of Tecis. Detlef has an MBA focusing on Financial Services from the University of Wales/Cardiff, as well as a BA in Business Administration.”

Website: www.lipperweb.com

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