| Luxembourg posts strong UCITS inflows while other European funds suffer |
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| 24/03/2008 | |
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Trends in the UCITS market varied greatly from country to country in the fourth quarter of 2007. While Luxembourg posted the strongest inflows at €34.5bn France was the most severely impacted from turbulence in the equity and credit markets. It posted outflows totalling €50.6bn, according to a new European fund industry report. Net assets for UCITS fell by 2% in the fourth quarter, ending the year at €6.2bn. Luxembourg was the exception, benefiting from a high concentration of UCITS funds, in particular money market funds, and strong inflows from Asia. The fourth quarter was particularly difficult for Italian UCITS funds which saw €12.3bn in outflows. Spain posted outflows amounting to €11.7bn. Bond and balanced funds were hard-hit, according to the European Fund and Asset Management Association (EFAMA) findings. More specifically, a higher percentage of French assets are invested in enhanced money market and bond funds that can carry asset-backed interest rate products, says Peter De Proft, Director General of EFAMA. Another source of pressure was heightened competition from banking deposits against the backdrop of rising interest rates. The industry group collected data from 24 national associations and 45 corporate members. Still, UCITS assets grew by 4.2% when considering all of 2007 compared to a growth of 5.3% for non-UCITS assets. For the year as a whole, UCITS collected €170bn in new money. Most fund-of-hedge-funds and hedge funds exist outside of UCITS. These non-UCITS funds received substantial inflows during the year, says De Proft, stressing that there are few fund of hedge fund vehicles that operate under the UCITS Directive. Outflows UCITS equity and bond funds suffered the most in 2007, posting €57bn and €60bn in outflows respectively. "Intra-quarter swings in stock prices appeared to have triggered an entrenched reassessment of equity risk and the credit market shocks and the losses recorded by many stocks in the second half of 2007 deteriorated investment sentiment further." De Proft expects the UCITS market to recover in the second half of the year. The report cautions that the prospect for 2008 is uncertain. "Investors' appetite for equity exposure and interest rate risk is likely to remain subdued. In parallel, money market funds should benefit from flight-to-safety in the first quarter of 2008." Yet a number of positives underpin the UCITS market. "Assuming Asian economies continue to expand at a steady rate, UCITS should continue to attract net inflows from Asia as investors there are still in the early stages of diversifying their savings into investment funds." In 2007, UCITS asset growth was well above the European average in Norway, Liechtenstein and Turkey. VB |
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