The year 2022 will go down in the books as a pitch-black year for investors. A cocktail of worrying developments, including a spike in inflation, tightening monetary policy, the economic implications of Russia’s invasion of Ukraine, an energy crisis and recession fears, resulted in a historically bad investment year in which both equity and bond investors suffered hefty losses.
Against this backdrop, investors withdrew €130 billion in net assets from European mutual funds (active and passive combined) in 2022, marking the worst year for the fund industry since 2008. The lion’s share of this was accounted for by bond funds, where the counter stopped at €84 billion of outflows, representing negative organic growth of over 2%. The contraction due to withdrawals came to 0.44%, or EUR 28 billion, for equity funds.
The past 12 months proved especially painful for actively managed mutual funds. Indeed, investors did continue to allocate their assets to index funds and ETFs. Passive funds welcomed 55 billion in new money to equity trackers, while passive bond strategies saw almost 63 billion inflows. By comparison, actively managed equity funds saw net outflows of 83 billion and bond funds 147 billion. The total outflow for actively managed funds of EUR 238 billion leaves only the crisis year of 2008, when investors withdrew EUR 387 billion. The total inflow for passive funds of 107 billion euros was, however, the lowest annual net inflow since 2016. Opposing movements put passive’s market share in Europe at 23.79%, up from 22.04% in 2021. At the global level, 38% of assets are now managed through index-following products.
Red lantern
The series of interest rate hikes by central banks ended the popularity of growth stocks, which is also visible in the fund flows at Morningstar category level for the red lantern bearer, Global Large-Cap Growth equities. The category collected outflows of over 24 billion. The largest outflow within this category came from NN IP, which saw 3.6 billion euros flow out. However, most of these outflows came from the NN Sustainable Equity Fund, where there was a switch from the fund to a mandate solution. Among the losers within this category we find some well-known growth investors, including Fundsmith, Morgan Stanley and Baillie Gifford, but also Robeco which had to record over two billion outflows for Robeco Global Consumer Trends.
On the bond side, we saw a lot of outflows for strategies investing in short-term bonds. Eurizon Bond Short Term EUR T1 recorded 62% outflows, amounting to almost EUR 5.5 billion. US high yield strategies were also unpopular and saw EUR 12 billion outflows in 2022, about a fifth of assets under management. Among others, strategies from JPMorgan, Pimco and AXA were among the hardest hit funds in this category.
Taking stock over 2022, at the fundhouse level, Pimco accounted for most of the outflows. The bond specialist saw €21.7 billion of investor money flow out over the past 12 months. It marked the biggest outflow for the fund house in 15 years. Flexible bond funds in particular faced outflows. At fund level, the biggest outflows were for Pimco GIS Income Fund, Pimco GIS Diversified Income Fund and Pimco GIS Global Investment Grade Credit Fund, which saw between EUR 2.6 billion and EUR 4.7 billion in outflows.
Outflows at Insight
At Insight Investment Management, part of BNY Mellon, 17 billion euros of invested assets flowed out by 2022. Substantial outflows included the fund house’s liquidity funds, as well as asset-backed security strategies.
BlackRock recorded total outflows of 16.2 billion euros across all asset classes, with equity funds seeing more money flow out (10.7 billion euros) than bond funds (8 billion euros). It marked the first annual outflow for the fund house in 15 years. It is noteworthy that most of the outflows came from the fund house’s index funds, while the ETF arm under the iShares label saw over 43 billion euros in inflows. Among index funds, investors mainly sold their holdings in trackers focused on Japanese equities, UK equities and emerging markets.
Top 5 fund outflows in 2022:
|
Name |
|
Estimated Net Flow (€Mln) 1-Yr |
|
PIMCO |
|
(21,755) |
|
Insight Investment Management |
|
(17,000) |
|
BlackRock |
|
(16,260) |
|
Eurizon |
|
(12,594) |
|
Credit Suisse |
|
(12,590) |
Jeffrey Schumacher is director manager research at Morningstar. Morningstar analyses and evaluates investment funds based on quantitative and qualitative research. Morningstar is one of Investment Officer’s knowledge partners and ranks five mutual funds or providers every week.