Europe’s mutual funds continue to bleed heavily

Financial Times

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Europe’s active asset managers face an unprecedented challenge in dealing with continued mutual fund outflows.

Investors have pulled €258bn from actively managed equity funds since the start of 2022, with a further €140bn withdrawn from multi-asset and alternative funds, Morningstar data shows.

However, passive product providers have prospered from investor demand, with inflows to index and exchange traded equity funds totalling €256bn.

Passive bond funds garnered €174bn over the same period.

This article was previously published by Ignites Europe, a title owned by the FT Group.

Asset managers have never before had to face such a prolonged period of redemptions from European mutual funds.

Prior periods of outflows have tended to be restricted to relatively short periods, even if the withdrawals have been large, such as in 2008, 2011 and 2018.

By contrast, aggregate net outflows from active funds are continuing well into their third year in 2024.

Bond funds are a brighter spot for active managers, gathering net inflows in both 2023 and the early months of 2024.

Passive funds have enjoyed aggregate net inflows in each of the five years in this analysis, totalling €828bn across equity and bond funds. Even in years when active funds have attracted inflows, clients have still been net contributors to passives.

Prior to 2022, active equity funds attracted net inflows in both 2020 and 2021, totalling €239bn in the latter year. But these products then faced outflows of around €100bn in both 2022 and 2023.

By contrast, active fixed income funds shook off the outflows they experienced in 2022, with demand rising to €73bn of inflows in 2023 and then €89bn over the first four months of 2024 — outstripping all passive funds.

One feature of European fund inflows before 2022 was the demand for sustainable products. Sustainable equity funds had inflows of €256bn in 2021 alone.

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The full article is available here. This article was published at FT Markets.