For a country that has been so badly buffeted by the global and European crises, it may surprise some to discover Spain has had considerably robust mutual fund inflows within Europe over a sustained period of time. According to Lipper fund flow data, retail flows into mutual funds in the region were nearly €50 billion net for first quarter of 2014 alone. This was greater than the inflows for the U.K. and France combined and about half those of economic powerhouse Germany.

For many fund-of-funds managers regional tilts are important after they make the initial asset allocation decision (i.e., how much of the portfolio should be in bonds versus equities, etc.). But after the equity allocations are made to the U.S. versus the rest of the world, the regional tilt is often less significant because regional variations within Western Europe are traditionally less pronounced. That isn’t always the case; for the twelve months to end of May 31, 2014, the Lipper Global-Equity Europe sector returned 9.27%, whereas Lipper Global-Equity Iberia with 24.66% and Lipper Global-Equity Spain with 26.39% were considerably higher.

Table 1. Performance of Spanish & Iberia Equities v Europe (to May 31, 2014).

2014 07 11 JM01

Source: Lipper for Investment Management.

This situation will have rewarded Spanish domestic funds-of-funds in particular, since they were the majority of the purchasers of this regional class. (Domestic parochialism is a key issue in regional allocation; a U.K. balanced fund with a high allocation to the U.S. equity market may well confuse U.K. investors who are expecting to see more local exposure). Local funds will have done well from a Spanish regional exposure.

Table 2. Top 10 Spanish and Iberia Equity Funds by European Fund-of-Funds Popularity

2014 07 11 JM02

Source: Lipper, a Thomson Reuters company.

There are only 87 funds in these 2 regional classifications, and only a handful of these are represented in fund-of-funds portfolios. The most popular fund has been Fidelity Funds Iberia EUR,which was purchased by 38 buyers in May. Overall, this fund (in all its share classes) represented 31% of total exposure to the regions. Unsurprisingly, bank funds are popular in the region, with Banco Madrid and Santander funds purchased–particularly Santander Small Caps Espania–by nine buyers. Passive options are also very popular, with Accion, Amundi, dbx, and SSgA all well represented on the passive side (passive options totalled 39% of the allocation).

Abante Global Funds Spanish Opp Eur, with a return of 59.30%,was the best performer over the period. Interestingly, only a single buyer reaped the benefit of that fund selection!

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Jake Moeller

Jake joined Thomson Reuters Lipper in 2013 as Head of UK & Ireland Research. He has over eighteen years experience as an expert in mutual fund research, fund-of-funds portfolio management and asset allocation strategies. He spent six years managing the fund-of-funds suite and guided fund platform at AIG and has been a mutual fund research specialist for Lloyds Banking Group, Towry and the Commonwealth Bank of Australia. Jake is a Chartered Member of the Chartered Institute of Securities & Investment (CISI) and a Senior Fellow of the Financial Services Institute of Australasia (Finsia).

Website: lipperalpha.financial.thomsonreuters.com/contributor/jake-moeller/


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