The past year was just short of disastrous for the European mutual funds industry, according to Mon...
The past year was just short of disastrous for the European mutual funds industry, according to Moneesh Puri, European equity strategist at SchroderSalomonSmithBarney, as investors in the big five European countries bought just E0.4bn of equity mutual funds.
This compares to 2000 when, in the first quarter of the year, Europe saw an average inflow of E18.6bn to equity mutual funds per month, more than 44 times total net equity demand in 2001.
Puri said the euphoria created by the tech bubble resulted in a record E140bn of retail equity fund demand in 2000.
Indeed, he added, retail investors actually sold more than E80bn of bond and money market funds to finance the buying frenzy.
Puri said: 'A combination of negative corporate and economic newsflow, the falling value of recent investments and lack of a respite in the downward trend of equity prices have built retail investor angst to all-time highs. By February 2001, with the bear market continuing, it became too much, European investors sold E2.4bn of equity mutual funds, the first aggregate redemptions for five years.'
Puri said evidence suggests investors are more active buyers during times of positive market performance and sell during times of negative market momentum, whereas he said they should invest regularly throughout the economic cycle, averaging down their 'in' price during the bad times and preventing over-exuberance during the good.
However, Puri said, money market assets now represent an historically high 15% of European mutual fund assets, suggesting that, should markets continue to recover, retail investors, who for now remain momentum investors, could reallocate as much as E60bn back to the equity markets over the course of 2002.
£92bn transferred since 2015
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