Fund flows in 2016: Highest outflow since 2008
* After large fund outflows in 2016, we see some signs of revival in funds’ risk appetite
* Eurozone fund redemptions in 2016 were significantly higher than the outflows from non-euro markets
* Across sectors, consumer staples, telecoms and industrials posted largest outflows and IT, energy and financials lowest
Large fund outflows from Europe in 2016…
After three years of fund inflows, Europe registered an outflow of c9% of total assets under management (AuM) in 2016 (chart 1). This was the highest outflow since the last financial crisis in 2008. The extent of investors’ pessimism on Europe can be gauged from the fact that 2016 saw the longest streak (35 weeks) of negative flows since the beginning of flow data.
…although investors have turned less pessimistic recently
However, following the outcome of the US presidential election, we see some signs that investors are turning less negative on Europe. Albeit marginally, European funds have registered a small aggregate inflow since December 2016 (chart 2). Looking forward, the political haze surrounding the terms of Brexit and the outcome of forthcoming elections in key eurozone markets could put regional uncertainties back into the limelight. The unfolding of these events has the potential either to derail or to add to the current positive momentum in investors’ risk tolerance.
Eurozone fund outflows in 2016 outpaced non-euro markets
In 2016, outflows from eurozone markets were significantly higher than the outflow from non-eurozone markets in Europe (chart 3). Italy, Spain and Germany saw steep outflows of 13%, 10% and 10% of total AuM, respectively. Norway, Switzerland and the UK posted relatively low redemptions of 1%, 1% and 3% of total AuM, respectively.