European fund flows surge €210bn in Q1

European fund managers have registered their highest quarterly inflows in five years, bringing a much-needed boost to active asset management houses following a torrid year for the industry in 2016.

The surge of money into Europe’s mutual fund industry, which was spread across equity, bond and alternative funds, was unexpected against a backdrop of heightened political tension on the continent.

Investors poured a net €210bn into Europe’s mutual funds in the first three months of the year, the highest quarterly inflows since at least 2012.

Massimo Greco, head of European funds at JPMorgan Asset Management, the US fund house whose assets hit an all-time high at the end of March on the back of inflows, said Donald Trump’s election as US president last November had boosted confidence in the investment market.

The latest inflows were more than double the €82bn of new money invested in European mutual funds in the previous three months.

Mr Greco said: “The optimism for risk taking is increasing. Everyone talks about the reflation trade, the Trump trade. The forecasts for the global economy are increasingly positive. There is increased expectation among investors that equities and parts of the bond markets [will do well].”

Mr Greco, whose company was the third best-selling asset manager in Europe in the first quarter after registering €13bn of net inflows, added that while the region remains mired in political uncertainty, investors have become less wary of geopolitical risks.

“Politics is politics, but the fundamentals are strong. Growth is picking up in Europe, purchasing managers’ indices [indicators of the economic health of sectors] are moving in the right direction and [corporate] earnings are coming out strong. If we didn’t have a little bit of this political risk, we could potentially have more inflows,” he said.

Amundi, Schroders, Ashmore, Jupiter and GAM are among the large listed fund houses focused on actively picking stocks and bonds that have reported sizeable inflows or increases in their assets under management in the first three months of the year.

This followed a collapse in actively managed fund sales last year, which dropped 91 per cent to €19bn, denting profits and net inflows at many of Europe’s biggest investment companies.

This year’s inflows are also a marked turnround on 2016, when investors pulled €21bn from European funds in the first three months of the year on the back of concerns about volatile stock markets and Chinese growth.

Justin Bates, an analyst at Liberum, the brokerage, said: “2017 is certainly shaping up to be better than last year for flows. 2016 certainly was a shocker.”

Paul McGinnis, an analyst at Shore Capital, the brokerage, said he was “surprised” by the level of new money pouring into UK-listed fund companies, but added that investors may be returning to funds after strong stock market rallies last year.

“Perhaps some investors regret missing out on the strong returns that were available following the US election,” he said.

Equity funds have been a surprise winner of the influx of money into Europe’s investment industry this year, registering €34bn of net inflows, according to Lipper, the data provider that compiled the figures. Bond, multi-asset, money market and alternative funds also proved popular among investors.

TJ Voskamp, head of wholesale for Europe at Aviva Investors, the UK fund house, said: “We expect actively managed funds to continue to gain positive traction as investors appreciate their value within an environment of multiple uncertainties.”

According to an index created by State Street Global Exchange, the US bank, investor confidence has increased for two months in a row on the back of an improving outlook for global growth and expectations of higher inflation.

Other high-profile fund managers have urged investors to approach equity and bond markets with caution.

Bill Gross, the famed bond fund manager, said in April: “Equity markets are priced for too much hope, high-yield bond markets for too much growth, and all asset prices [are] elevated to artificial levels that only a historically biased investor would believe could lead to returns resembling the past six years.”

Henderson, the UK fund house merging with US rival Janus, is one of the few asset managers that has failed to take advantage of rising investor confidence. It registered net withdrawals of €1.8bn in the latest quarter, which were partly related to the merger process.

However, Andrew Formica, Henderson chief executive, said at the time: “While retail-client outflows continued, we saw an improvement in client sentiment and flows as we moved towards the end of the quarter.”

Last week, Jupiter Fund Management reported its highest quarterly inflows since the London-headquartered investment house listed seven years ago.

GAM, the Swiss asset manager that had a dismal 2016, and Ashmore, the emerging market specialist that has been hit with years of investor redemptions, last month both reported net inflows.

Amundi, Europe’s largest listed fund house, secured €32bn of net new money in the first quarter.

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