TheChek News Flow

October’s net sales for active equity and bond funds were higher than passive rivals for first time in 20 months

Flows into actively managed funds have outpaced those for their passive rivals for the first time in 20 months as asset managers attracted their largest product sales for almost three years.

Europe-domiciled active funds garnered €33.1bn of inflows in October, surpassing the €29.2bn won by passive funds, according to Morningstar data, excluding money market funds and funds of funds.

Active fund flows had lagged passive funds each month since March 2023. The last quarterly period of superior flows for active funds was in the last quarter of 2021.

The improvement reflected a pick-up in client demand for both bond and equity funds, according to the data.

Amin Rajan, chief executive of Create-Research, an asset management consultancy, said: “Active funds have been gaining ground as markets have been unusually volatile and creating unusual price anomalies, which active managers are better placed to harvest.”

Valerio Baselli, senior international editor at Morningstar, said the rise of active products “proves that there is still room for active managers, especially in some asset classes [such as] the bond universe”.

Active fixed-income funds attracted €34.1bn, while active equity funds had inflows of €3.4bn, marking their second positive monthly net sales of the year, Morningstar data showed.

Rajan said: “Fixed income has been less amenable to passive investing, where the required data on benchmarks and products are less widely available. Thus passives have made far less inroads into fixed income compared to equities.”

Baselli added that although exchange traded funds were “slowly gaining ground”, the fixed-income universe remained dominated by active asset managers as bond fund investors continued to “pick active funds over passive in most cases”.

But he said the figures did not suggest a sign of “a long-term recovery for active funds”, particularly in relation to the relatively low level of inflows to equity funds.

By contrast, Philip Kalus, managing director at Acolin Intelligence, an asset management consultancy, said the trend was not a “one-off” but a “continuation”, adding that he expected demand for active strategies to last.

He said the trend began in the first quarter of 2024 when active outflows “slowed significantly” and “picked up pace” in the second quarter.

“Most investors were largely on the sidelines in 2023 and started to get active again with more emphasis on potential alpha, less beta and in sectors which haven’t been much in favour in recent years,” said Kalus.

Nordea and BlackRock were among the best-selling active fund firms in October, with inflows to their active products totalling €6.3bn and €4.9bn, respectively, largely driven by demand for equity products.

Aegon and Pimco were the best-selling managers of active fixed-income products, with respective inflows of €3.3bn and €2.6bn to these funds.

Overall European mutual funds and ETFs gathered inflows of €62.3bn in October, up from €41bn in September, and the highest level since December 2021, Morningstar data showed.

Fixed-income funds continued to be the best-selling asset class overall, drawing in net flows of €41.5bn. Equity funds also saw improved sales, with inflows of €25.4bn in October.

By contrast, property funds experienced the largest outflows, totalling €2bn.

Abrdn was hardest hit, suffering net outflows of €2.5bn, followed by Aviva with €1.4bn and Baillie Gifford with €1.2bn.

BlackRock was the best-selling fund house overall in October, attracting net inflows of €14.3bn across active and passive products, followed by Nordea with €6.4bn.

Adani Group says it has enough cash to cover debt payments for the next year

Indian conglomerate releases report on its operations after the US indictment of founder Gautam Adani for alleged bribery

Adani Group said its listed companies had enough cash to cover debt payments over the coming year, as the conglomerate gave the first snapshot of its operations since US authorities indicted founder Gautam Adani in a bribery case last week.

In report that a company official described as a “half-yearly compendium of the business”, Adani Group said it had passed $10bn in earnings before interest, tax, depreciation and amortisation for the first half of its financial year, and was on track to report $12bn for the full year.

“Each of the portfolio companies has sufficient liquidity to cover all debt servicing requirements for at least the next 12 months,” said Adani Group on Monday.

The report comes after Adani was named alongside seven others in a criminal case over an alleged scheme to bribe Indian government officials in exchange for advantageous terms on solar power contracts that were set to yield more than $2bn in profits.

Adani Group has said the US charges are “baseless” and that “all possible legal recourse will be sought”.

Shares of the group’s listed companies plunged after the US unveiled the criminal and civil charges last Thursday, wiping off more than $20bn in market value.

On Monday, shares of Adani Enterprises and Adani Ports and Special Economic Zone climbed 3.6 per cent and 2.5 per cent respectively. Adani Enterprises remains down 21 per cent since the start of the year while Adani Ports is up 11 per cent over the same period.

Despite the rise in share prices for Adani Enterprises and Adani Ports, the group’s dollar bond prices were down. Ports bonds maturing in 2027 fell 1.6 cents to 88.98 cents on the dollar.

Trump nominee has caused concern in the industry due to his desire to reduce spending on medicines

Two drug developers are pressing ahead with public listings in the coming months despite fears that Robert F Kennedy Jr’s nomination as the top US health official will suppress biotech valuations, in a test of the market’s willingness for risk.

Kennedy’s nomination as secretary of the US Department of Health and Human Services by president-elect Donald Trump has roiled biotech stocks, with shares of big pharma groups and other healthcare companies gyrating in the weeks since.

The nomination of Kennedy has raised concerns in the biotech industry due to his sceptical stance towards vaccines and weight-loss drugs, his ambition to reorient spending away from medicines towards chronic disease and his vow to eliminate “entire departments” at the Food and Drug Administration, the US medicines regulator.

Autoimmune disease-focused biotech Odyssey Therapeutics, valued at $640mn in its latest private funding round, and cancer drug developer Aktis Oncology have been holding meetings with potential investors in recent weeks to gear up for initial public offerings, three people said. Both biotechs have confidentially filed to list with the US Securities and Exchange Commission. They were likely to push ahead with their listings by the first quarter of next year, the people said.

Confidentially filing for an IPO with the SEC does not oblige a company to list, but it puts them on a footing to go public with their listing ambitions, which they must do 15 days ahead of their official IPO date. Both companies have separately hired advisers to work on their listings, the people added.

The SPDR XBI exchange traded fund, which tracks an index of small biotech companies, fell more than 10 per cent in the days after Trump’s election and his nomination of Kennedy. It has recovered slightly since, closing at $96.24 on Friday.

Pharmaceutical companies such as Pfizer, Eli Lilly and GSK also fell substantially as investors digested the news of the nomination, but have since trimmed their losses.

Kennedy’s nomination added uncertainty to what was a brightening picture for the biotech industry, which was expecting to benefit from falling interest rates and a less aggressive antitrust enforcer atop the Federal Trade Commission.

So far this year, there have been 26 listings for biotech companies, raising a combined $4.3bn, after two slow years of issuance for the sector. But still the number of biotech IPOs is far behind the pandemic years, which generated a surge of investor interest.

Mike Perrone, a biotech analyst at investment bank RW Baird, said the election and the ensuing nomination of Kennedy, known as RFK Jr, had “changed things pretty materially”. The possibility of Trump introducing tariffs made rapid rate cuts less likely, while Kennedy’s possible appointment might affect the ease of getting drugs approved by the FDA, Perrone added.

“It will be a more muted year-end than it seemed like it was going to be pre-election, but if you have a high-quality drug and the support of institutional investors, biotechs are still going to list, but just maybe at a reduced valuation,” said Perrone. The biotech sector is closely linked with changes in interest rates because of the need to raise debt to fund costly clinical trials.

Last week, Trump announced that he had picked Johns Hopkins surgeon Marty Makary to run the FDA, among a flurry of health official nominations, in an appointment that was welcomed by the pharma industry.

Aktis, which completed a $175mn funding round in September, is researching drugs in the promising field of radiopharmaceuticals, a targeted form of radiotherapy used to treat cancers. Odyssey’s lead drug is an immunotherapy treatment for Crohn’s disease. Both biotechs are undertaking phase-two trials. Aktis and Odyssey did not respond to multiple requests for comment.

Mikhail Keyserman, a managing director at healthcare investment bank LifeSci Capital, said the uncertainty in markets since the nomination was “a blip” and the bigger question for the sector was how quickly interest rates would fall. “I’d be watching the 10-year Treasury yield [which is linked to interest rates] a lot more than what RFK Jr is going to tweet on his X account,” he said.

Deal would create one of Europe’s most valuable lenders and has no implications for Commerzbank investment, bank says

Italy’s UniCredit has launched a €10.1bn takeover bid for its rival Banco BPM, in a deal that would step up consolidation of Europe’s fragmented banking sector.

UniCredit said on Monday that its all-stock offer valued Banco BPM’s shares at €6.66 and the deal, if agreed, would create Europe’s third-largest lender by market capitalisation.

It comes months after UniCredit, led by dealmaker Andrea Orcel, shook European finance by revealing it had amassed a stake in Commerzbank, Germany’s second-biggest lender.

Orcel said in a statement that a deal for BPM would “broaden our geographic reach, expand our client base across both retail and corporate clients, and further grow our premium businesses”, adding that it would cement UniCredit’s status as Italy’s second-biggest bank.

He said the offer for BPM “does not have any implications” for its investment in Commerzbank. The German bank’s management has so far dismissed UniCredit’s approach. 

“The situation there is very different,”Orcel said. He said, in relation to its Commerzbank stake, that UniCredit “may either seek to go further if the conditions are right or to exit our investment and return the capital”.

That decision would take time because “I think it is important to respect the electoral process in Germany”, he said. Germany is set to hold a snap general election in February.

Talk of consolidation among Europe’s banks has begun to pick up in recent months, with policymakers in the region keen to encourage the emergence of larger domestic groups and multinational banks that can challenge US giants and fast-growing rivals in Asia.

UniCredit’s offer represents a 0.5 per cent premium to Friday’s price but a premium of 14.6 per cent premium to the share price on November 6, the date on which Banco BPM made an offer to buy asset manager Anima Holding for €1.6bn.

Days later BPM also took a 5 per cent stake in Monte dei Paschi di Siena when Italy’s government offloaded part of its shareholding in the once-ailing lender, kick-starting a domestic consolidation process.

UniCredit said that BPM “does not currently have the adequate scale to operate in a context of major change and evolution”.

Orcel made his name advising on bank M&A, including the €21bn merger of Italy’s Credito Italiano with UniCredito to create UniCredit. He also advised on Royal Bank of Scotland’s disastrous acquisition of ABN Amro in 2007.

UniCredit built its Commerzbank position by buying a chunk of shares from the German government and adding to that using derivatives.

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