Equity funds recorded net outflows for the second consecutive quarter in Q2 despite buoyant stock markets in the spring, according to figures from The European Fund and Asset Management Association (EFAMA).
The figures revealed investors' appetite for equity exposure did not recover in the second quarter from the stock market turmoil suffered earlier this year. EFAMA believes this situation is likely to persist in Q3 as a consequence of the crisis in the US subprime market and the financial contagion to the the global credit and stock markets.
“However, the interventions of the central banks to avoid harm spreading to the real economy should contribute to restore confidence and trigger a rebound in stock prices," EFAMA adds. "At the same time, investors are likely to reappraise the risks associated to enhanced money market funds investing in asset-backed securities. The search for safety will benefit funds following a more defensive style of investment.”
Net sales of UCITS funds reached EUR 84bn in Q2 down from EUR 106bn in the previous quarter. A fall in net inflows in money market funds explains most of the difference, EFAMA says. Balanced funds recorded the highest level of net inflows (EUR 28bn) followed by money market funds (EUR 26bn), 'other' UCITS (EUR 23bn) and bond funds (EUR 12bn).
For the first half of 2007, total net sales of UCITS were EUR 190bn. This level was higher than in the first half of 2005 (EUR 184bn) but lower than in the first half of 2006 (EUR 239bn). Stronger inflows into money market funds could only offset partially the fall in investor demand for equity funds.
Luxembourg retained its position as the top selling fund domicile in Europe with net sales totaling EUR 64bn in Q2 followed by France, Ireland and the UK.
Total fund assets domiciled in Europe increased by 4.1% in the second quarter of 2007, and by 9.1% in the first half of 2007, to reach 8,235bn at the end of June. It is the first time that total fund assets crossed the EUR 8trn threshold.
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