Investors pull record €250bn from European funds

Investors fled mutual funds in Europe at the fastest rate on record in March when they redeemed €246bn, a number that dwarfs the worst month in the global financial crisis, as concerns mounted over the impact of coronavirus.

Redemptions last month were more than twice those suffered during the worst-hit period in the financial crisis, when investors pulled €108bn from long-term funds in October 2008, according to Morningstar, the data provider.

On top of the investor outflows, Europe’s fund industry was hammered by falling markets that led to a nearly €1tn drop for long-term funds.

Overall, assets fell from €9.5tn at the end of February to €8.2tn at the end of March, according to Morningstar. Assets tumbled from €10.8tn to €9.5tn over the same period when including money market funds.

The fall in assets will hit profits in the fund industry, which is already grappling with a price war. According to calculations from Ignites Europe, a Financial Times’ publication, European asset managers are facing an estimated drop in fee revenues of more than €11bn following market falls and client outflows as a result of the coronavirus pandemic. 

“While investors reacted to the spread of coronavirus with a certain sluggishness in February 2020, Covid-19 wrought havoc in Europe’s fund market in March,” said Ali Masarwah, director of Emea editorial research for Morningstar.

The redemptions came as markets across the world plummeted in response to the Covid-19 pandemic, leaving asset managers struggling to navigate the end of a record-breaking bull run.

Pimco, the US bond fund giant, had the highest redemptions in Europe, with investors withdrawing €23.7bn, chiefly from its flagship Pimco Income fund. 

It also marked the largest one-month period of redemptions for the US asset manager on record. The fund manager had previously lost huge sums of money after the departure of former star fund manager Bill Gross.

Pimco said its “defensive positioning and liquidity management enabled [it] to navigate unprecedented market volatility in March that impacted virtually every segment of the asset management industry”. 

Overall, bond funds across Europe were hit with redemptions of €140bn, almost three times the previous monthly record for outflows of €54bn in October 2008.

BlackRock, the world’s largest asset manager, also suffered outflows across both its active and popular iShares exchange traded funds of more than €17bn, while UBS Asset Management and Vanguard had net sales of mutual funds.

Equity funds suffered outflows of €56bn in March, another record when compared with the previous low in early 2008 when investors withdrew €46bn from equity funds domiciled in Europe. Global large-cap blend funds bore the brunt of the latest redemptions followed by US large-cap blend and global emerging-markets equity funds.

Unlike in previous sell-offs in 2008 and 2011, index funds were hit with outflows during the month. Long-term index funds shed €28bn in March, by far their highest outflows in a one-month period. 

The data is for open-end funds and ETFs domiciled in Europe for March 2020.

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