Active fund strategies bear brunt of outflows in Europe

Active asset managers are bearing the brunt of negative sentiment with outflows from open-ended funds surpassing €150bn in the year to the end of August, while passively managed inflows have helped mask the extent of the damage.

Markets have undergone a wide sell-off since the start of the year as the Ukraine war, rising interest rates, inflation and a looming recession spooked investors.

Active funds have suffered, while passive funds have managed to gather net inflows.

Europe-domiciled funds posted €72.8bn in net outflows to August, according to Morningstar data, excluding money market funds and funds of funds.

However, active funds bled roughly €150.5bn, while passive funds registered inflows of about €77.6bn.

Amin Rajan, chief executive of Create-Research, said active funds “should be doing relatively better than passives” at times like this but investors have been nervous.

“Investors are amassing dry powder and waiting to deploy it during big market ructions that create good buying opportunities,” he said. “There is a lot of wait-and-see currently.”

US bond group Pimco had lost most in the year to August, with net outflows exceeding €20bn, followed by Italian fund house Eurizon, UK manager Baillie Gifford, Insight Investment Management and Morgan Stanley Investment Management.

The rest of the top 10 firms with the heaviest losses include Pictet, UK-listed manager Schroders, Carmignac, Abrdn and French fund house Axa Investment Managers.

Pictet suffered roughly €6bn of outflows to August, according to Morningstar.

“Like many asset managers that saw strong inflows in 2021, we have seen some outflows in 2022,” said Luca Di Patrizi, head of distribution at Pictet Asset Management. “However, it is not a surprise that mutual funds have come under pressure in 2022 in difficult market conditions, as investors continue to derisk.”

He added: “We see this as a cyclical trend, as a result of weak sentiment and recession fears, rather than a reflection on our product offering.”

Di Patrizi said the firm, for which assets under management have fallen from SFr698bn ($711bn) in January to SFr610bn in June, had seen “more interest” in its alternative strategies, such as real estate, hedge funds and private markets.

“We continue to invest in our product range and focus on our long-term approach to investment,” he said.

Carmignac, the €33bn French asset manager, suffered almost €5bn in net outflows in year to August, Morningstar data show.

The firm said clients allocating away from short-duration funds had resulted in outflows from certain strategies at the firm “in line with the wider market”.

“In contrast, our alternative [long/short] funds, consistent with investor demand for uncorrelated sources of returns, have seen inflows, along with our credit strategies,” it said.

Pimco and Morgan Stanley declined to comment. Eurizon, Baillie Gifford and Schroders did not respond to a request for comment.

Broadridge data show that outflows from global open-ended funds, excluding exchange traded funds, were $147bn in the first quarter of 2022, climbing to $502bn in the second quarter.

Nabeel Ansari, associate director, global insights at Broadridge Analytics Solutions, also pointed out that given flows had been positive to passive open-ended mutual funds, “this really amplifies the negative net flows to active”.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at igniteseurope.com.