Funds, Flows & Facts – October 2017

Fund Flow Digest

The second quarter of 2017 was mostly characterised by gains in global equity markets. In the Eurozone, reduced political risk following the French election and positive economic news regarding the business climate in Germany contributed to initial gains. During the quarter, the ECB commented that the threat of deflation is likely to be over.

Bonds also performed relatively well during the second quarter. However, in the latter part of the quarter, there was a pullback in both equity and bond performance. This was driven by comments from central bank leaders in the US, Europe and the UK regarding tighter monetary policy. It is anticipated that ECB economic stimulus measures could soon be withdrawn.

Net Sales of UCITS reduced to €174bn during Q2 2017 which is a significant decrease on the figure of €202bn in Q1 2017.

A total of 24 countries registered net inflows into UCITS in the second quarter of 2017. So far in 2017, bond funds and multi-asset funds have attracted the largest net sales with EUR 168bn and EUR92bn respectively. Flows into money market funds reduced in Q2 2017 which is likely the result of reduced market uncertainty in comparison to 2016.

Sources: EFAMA, Broadridge, Schroders.

Nordic Countries

Funds domiciled in the Nordic region (Denmark, Finland, Norway and Sweden) represent 5.6% of the overall Net Assets of European domiciled funds (UCITS and AIFs). However, the overall size of the investment funds market in the region is large with total assets of over EUR1.2tn. Many funds established by Nordic managers have been established in cross-border domiciles such as Luxembourg and to a lesser extent Ireland.

Nordic Domiciled Net Assets (UCITS and AIFS) June 2017

The Nordic region is very sophisticated in terms of fund selection with a high level of openness to foreign fund managers in comparison to other European fund domiciles. Sweden has historically been a pioneer in the field of mutual funds with 4 out of 5 adult Swedes using mutual funds for saving purposes.

The Nordic institutional investor sector contains large sovereign wealth funds such as AP Fonden, the Swedish state pension fund and Norway’s sovereign wealth fund which is the biggest in the world with assets of over $1tn.

Private and retail banks are the main distribution channels in the region in addition to local fund providers. IFAs and platforms are also active in the region.

Sources: EFAMA, PWC, Accelerando, FIM.

The Quarter in Numbers

  • 10 The number of countries with UCITS net sales greater than €1bn in Q2 2017.
  • 70 The value in EUR billion of AIF net sales in Europe in Q2 2017.
  • 52.5% The % of European fund net assets represented by UCITS.
  • 59,603 The total number of UCITS and AIF funds in Europe at the end of Q2 2017.

Irish eyes…

Irish domiciled fund assets increased to €2.24tn during Q2 2017. The YTD growth in Irish domiciled fund assets is 6.8%.

Irish Domiciled Funds Net Assets

In October 2017, the Central Bank of Ireland (“CBI”) announced the upcoming publication of a survey studying the outsourcing arrangements in financial services companies. Gerry Cross, director of policy and risk at the regulator, has said that the CBI is looking to “gain further insight into the current and future pattern of outsourcing arrangements from a cross-sectoral perspective”. Earlier this year the CBI warned that the level of outsourcing is likely to be close to the limit of what is appropriate for this industry. Despite this word of caution from the CBI, the overall trend in the Irish funds industry remains very positive.

Sources: Irish Funds, Ignites.

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