The data leaves no doubt about it. This year is a tough one for investors everywhere. It’s very clear in the numbers reported this week, both for Europe and for Luxembourg, the domicile for about 10.000 Ucits funds, about one third of all such funds in Europe. Luxembourg’s loss of total fund value this year now is roughly equivalent to the size of an economy like Taiwan. At a European level, the losses can be compared to an economy the size of Canada.
In the first nine months of this year, funds everywhere have erased all the gains they booked last year as investments worldwide took a beating as investors had to contend with surging inflation, a series of interest rate hikes on both sides of the Atlantic and the effects of the war in Ukraine.
Headline-grabbing record almost a year old
At the end of September, the grand duchy hosted 5,038 billion euro worth of fund assets, a decrease of five percent from a month earlier, and down from the widely reported and headline- grabbing record 5,859 billion at the end of last December.
According to CSSF data, Luxembourg funds collectively lost 262.4 billion euro in September. The negative development in financial markets contributed 221.5 million to that decline, and 40.9 billion stemmed from net outflows in capital investments. Except for fixed income funds exposed to the US dollar money market, every single fund category experienced declines.
From their peak at the end of 2021, Luxembourg’s total fund assets - including Ucits and alternative funds like specialised SIF funds and Sicars with risk capital - have fallen by some 822 billion euro. If you, as reader, permit this columnist to compare this to a country’s GDP to illustrate this number, we are talking about an economy the size of Taiwan. Or a little bit less than the Dutch economy. The world is shrinking, and so are funds.
Luxembourg’s fund market, meanwhile, is back to back where it was in January 2021.
Europe is down 2,300 billion euro
Let’s look beyond Luxembourg and consider all of Europe. One day after CSSF posted theirs, data firm Refinitiv Lipper on Tuesday released its third-quarter data for the European fund market. At the end of September, total assets under management stood at 13,000 billion, down from 15,300 billion at the end of December.
So investors in European funds are down 2,300 billion so far this year. In GDP terms, that’s as if we have lost an economy the size of Canada, or about two-thirds of Germany, or a little bit less than France. Overall net outflows accounted for about 324 billion euros. The rest - about 86 percent - stemmed from declining markets.
A comparison of CSSF’s Luxembourg’s data with the Refinitiv’s European fund data teaches us that Luxembourg’s share of the European fund market is holding up well. At the end of last year, it was 38.3 percent. Based on the latest data, for the end of the third quarter, it was 38.7 percent.
For those active in the Luxembourg fund ecosystem, the fact that the grand duchy is improving its market share - even marginally - may offer some consolation at a time when markets have yet to establish a new sense of direction.
In Flux is a regular column on Investment Officer Luxembourg shedding light on the Luxembourg financial ecosystem. Financial journalist Raymond Frenken is Editorial Manager of InvestmentOfficer.lu. He has followed international financial markets and EU financial regulation for more than two decades.