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Review of the European Fund Market, First Quarter 2016

With regard to the rough market conditions during first quarter 2016, it was not surprising that the assets under management in the European mutual fund industry decreased from the record level of €8.88 tr (December 31, 2015) to €8.60 tr at the end of March 2016. This decrease of €288.1 bn was mainly driven by the performance of the underlying markets (-€253.2 bn), while net sales contributed outflows of €34.9 bn to the overall change in assets under management in the European fund industry.

Graph 1: Assets Under Management (Euro Billions) in the European Fund Industry by Asset Type, 2003-March 31, 2016

16 05 02 Graph 1 AuM

Source: Thomson Reuters Lipper

With regard to the overall number of products, it was not surprising that equity funds (€3.11 tr) held the majority of the assets, followed by bond funds (€2.17 tr), mixed-asset funds (€1.30 tr), money market products (€1.11 tr), alternative products (€0.53 tr), real estate products (€0.17 tr), “other” funds (€0.17 tr), and commodity funds (€0.03 tr).

Graph 2: Market Share Assets Under Management in the European Fund Industry by Asset Type, March 31, 2016

16 05 02 Graph 2 Market share AuM by Asset Type

Source: Thomson Reuters Lipper

Fund Flows by Asset Type

Taking the overall market conditions during first quarter 2016 into account, it was not surprising that equity funds (-€18.27 bn) faced the highest net outflows of all long-term mutual funds for the quarter, bettered by bond funds (-€5.9 bn) and mixed-asset funds (-€5.20 bn) as well as “other” funds (-€0.61 bn). At the other end of the spectrum alternatives funds enjoyed the highest net inflows (+€10.69 bn) during first quarter 2016, followed by real estate products (+€2.26 bn) and commodity funds (+€1.01 bn).

Graph 3: Estimated Net Sales, Q1 2016 (Euro Billions)

16 05 02 Graph 3 Flows by Asset Type YtD

Source: Thomson Reuters Lipper

Money Market Products

After net inflows during January and February, money market products faced heavy net outflows (-€30.0 bn) for March, which drove the overall flows in money market products to a negative €18.89 bn—the highest outflows from all asset types for first quarter 2016.

This flow pattern drove the overall fund flows to mutual funds in Europe to a negative €34.9 bn for first quarter 2016.

Money Market Products by Sector

Within the money market fund segment Money Market EUR (+€8.11 bn) was the best selling sector for first quarter 2016, followed by Money Market SEK (+€2.27 bn) and Money Market GBP (+€1.75 bn). At the other end of the spectrum Money Market USD (-€32.10 bn) and Money Market HUF (-€0.30 bn) suffered the highest net outflows.

Taking the flows for March into account, the flow pattern for money market products showed that this asset type is used by investors to implement not only cash positions, but investors also seem to implement their views on different currencies compared to their portfolio currency by using money market products.

Assets Under Management by Lipper Global Classifications

With regard to the Lipper global classifications, the European fund market was split into 360 different peer groups at the end of March. The highest assets under management were held by funds classified as Equity Global (€655.16 bn), followed by Money Market EUR (€525.63 bn), Equity US (€311.59 bn), and Bond Global (€303.94 bn) as well as Equity Europe (€300.14 bn). Overall, 18 of the 360 peer groups each accounted for more than €100.00 bn of assets under management. In total, these 18 peer groups accounted for €4.30 tr. These numbers showed that the assets under management in the European fund industry were highly concentrated.

Graph 4: Twenty Top Lipper Global Classifications by Assets Under Management, March 31, 2016 (Euro Billions)

16 05 02 Graph 4 20 largest LGCs by AuM

Source: Thomson Reuters Lipper

Fund Flows by Lipper Global Classifications

With regard to the overall sales for first quarter 2016, it was not surprising that there were three absolute return categories—Absolute Return EUR Medium (+€3.88 bn), Absolute Return Other (+€3.49 bn), and Absolute Return EUR High (+€3.22 bn)—among the ten best selling Lipper classifications. It was a surprise that Bond Emerging Markets Global in Local Currencies (+€2.23 bn) and Equity Emerging Markets Global (+€1.77 bn) were among the top-selling Lipper global classifications for first quarter 2016.

Graph 5: Ten Best Selling and Ten Worst Selling Lipper Global Classifications by Estimated Net Sales, Q1 2016 (Euro Billions)

16 05 02 Graph 5 Best and worst sectors by Flows

Source: Thomson Reuters Lipper

On the other side of the table the ten peer groups with the highest net outflows accounted for €58.87 bn of outflows, driven by the flows from Money Market USD (-€32.1 bn), bettered by Equity US (-€4.3 bn), Absolute Return EUR Low (-€4.14 bn), and Equity Japan (-€3.89 bn) as well as Bond USD High Yield (-€3.10 bn).

Assets Under Management by Promoters

A closer look at the assets under management in the European fund industry by promoters also showed that the assets under management in the European fund industry were concentrated, since only 21 fund promoters in Europe held assets at or above €100.00 bn. The largest fund promoter in Europe—BlackRock (€562.11 bn)—accounted for more assets than the number-two promoter—Amundi (€267.66 bn)—and the number-three promoter—Deutsche Bank (€257.19 bn)—together.

Graph 6: Twenty Top Promoters by Assets Under Management, March 31, 2016 (Euro Billions)

16 05 02 Graph 6 20 largest Promoter by AuM

Source: Thomson Reuters Lipper

Fund Flows by Promoters

It was a little surprising to see that Generali led the sales table for first quarter 2016 with net sales of €6.74 bn, ahead of Europe’s largest fund promoter BlackRock (+€6.24 bn) and Legal & General (+€5.64 bn).

Graph 7: Twenty Best Selling Promoters, Q1 2016 (Euro Billions)

16 05 02 Graph 7 20 Best Selling Promoter

Source: Thomson Reuters Lipper

Overall, there were only 19 promoters of mutual funds in Europe that enjoyed inflows of more than €1 bn over first quarter 2016. The inflows of these 19 promoters summed to €49.20 bn.

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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