A record of €246 billion flowed out of investment funds last month, surpassing redemptions seen even during the darkest months of the great financial crisis. Commodity funds were the only ones to weather the negative trend, thanks to high demand for gold.
While investors initially reacted rather slowly to the spread of the coronavirus in February 2020, Covid-19 caused major damage in the European funds market in March. A closer look at the intra-month timing of equity funds reveals that the lion’s share of outflows occurred in the weeks ending 13 March and 20 March, just when equities bottomed out notes Ali Masarwah (photo), Director of EMEA Editorial Research at Morningstar, in the latest Morningstar European Asset Flows Commentary.
The €246 billion outflow more than doubled from its former record set in October 2008, the worst month in the financial crisis of 2007-09. At that time, “only” 108 billion euros was withdrawn from investment funds.
Unprecedented outflows
Most of the outflows were from bond funds: an unprecedented €140 billion. According to Morningstar, the outflow can be described as the mirror image of the search for yield in the post-financial crisis era. This hunt has been feeding funds aimed at the riskier parts of the global bond markets.
Equity funds also suffered record (net) outflows of €56 billion. Global large-cap blend funds carried the bulk of the redemptions, followed by US large-cap blend funds and global emerging market equity funds.
Some €26 billion was withdrawn from multi-asset funds. Investors withdrew another €23 billion from alternative funds in March. In October 2008, the previous trough, the outflow amounted to €12.7 billion.
Record inflows for gold
The only exception to the rule were commodity funds. It was the only major category that weathered the negative trend thanks to high demand for gold products.
Valerio Baselli, senior editor EMEA Editorial Research, said: ‘In the most volatile month in history, investors were looking for safe havens. With inflows in excess of €4 billion, precious metals funds experienced their best month since Morningstar began collecting European fund flow data at a sector level in 2007.’
Passive outflows
Although to a much lesser extent than their active equivalents, passive funds were not spared either. Index funds lost €28 billion in March. This is by far the highest outflow ever seen in a month and contradicts the picture seen in previous bear markets.
Some €11.3 billion was withdrawn from passive equity funds. For fixed income index funds, outflows amounted to €18.2 billion. In the passive spectrum, too, only commodities were successful, seeing a net €2.9 billion coming their way.
Inflows for UBS
With almost €6 billion in net inflows, UBS was at the top of the list in terms of inflow into the active spectrum. For the Swiss asset manager, it was the third consecutive month of positive flows.
Pimco, on the other hand, suffered the highest outflows among active managers. Outflows totalled €23.7 billion, making March the worst month ever for the American asset manager in terms of fund flows. Most of the outflow came from its flagship fund Pimco Income.
Among the passive providers, Vanguard was the best performer with almost €2.1 billion in inflows. This contrasted sharply with the fortunes of iShares, which saw net outflows of €7.1 billion.