The European equities fund flow report from Lipper analyzes the holdings of third party funds of funds in Europe to see which are the most popular funds and fund companies, and how asset allocations have changed over the past three years.
Sales of Third Party Funds of Funds in Europe (€m)
Net sales of funds of funds illustrate how activity has evolved through the period since the dot-com bubble burst. Flows into European equities reached a peak in the first four months of 2006, having grown throughout the previous year. While they then dropped in 2007, activity was still firmly positive for the first half before the massive sell-off through the winter. The trend looked to be improving through 2009-2010, but sales then struggled to stay positive in 2011 and much of 2012. 2013 has clearly seen a very encouraging trend for asset managers with inflows rising – although this does not include the volatile month of June.
European equities: Assets for the Largest Funds of Funds Markets: 2008 v 2013 (€m)
Europe is not a single market and assets managed by funds of funds vary considerably across the continent, which is reflected in figure below. This not only shows the relative sizes of different funds of funds markets, but also which of these have actually shrunk in size over the past five years, namely France and Spain, although the former remains the largest European third party funds of funds market. Interestingly, while Spain’s economic problems help to explain the decline in fund assets, the same phenomenon is not reflected in Italy, which has remained very receptive to cross-border funds, but otherwise has fared poorly as a fund market.
European equities: Proportion of Asset Class Holdings for Third Party Funds of Funds
Firstly this data reveals funds of funds’ increased allocations to bond funds over the past three years. This is probably not surprising in itself, although the four percentage points rise represents a 15 percent increase in bond allocations overall. It is worth noting that some 20 percent of funds of funds have a purely equity-based investment objective.
Proportion of Sector Holdings for Third Party Funds of Funds
More interesting is to be able to drill down and see some of the most popular sectors – using Lipper Global Classifications. The Figure below shows most of the largest sectors into which funds of funds invest. The most striking changes brought to light in this chart are the rise in allocations to emerging market bond funds (hard and local currency funds combined), while there has been a clear retreat from European equities.
Most Popular Groups (ex-ETFs)
Groups with strong activities both in the U.K. and selling internationally dominate the highest rankings. A product range that spans widely is obviously important in order to feature higher in the Lipper rankings, and this is most evident with BlackRock, Inc. (NYSE:BLK), which has nearly 200 more funds of funds clients than second ranked JPMorgan Chase & Co. (NYSE:JPM).