European investors ditch equity for bonds and alternatives post Brexit


European investors unnerved by any potential Brexit market fallout ditched €19.2bn of European-domiciled equity funds, with funds invested in European equities suffering outflows of €4.8bn, Thomson Reuters Lipper research finds.

Conversely, inflows gathered towards bond, alternative Ucits, commodity, real estate products and other funds for a total of €2.6bn.

The June European fund flows report, published today, reveal BlackRock has been the winning fund group in the market turmoil of Brexit with net sales of almost €5.7bn (£4.8bn) despite European fund flows dropping €20.6bn as investors switch to risk-off mode. Inflows were mostly bolstered by €1.3bn of inflows into its bond funds.

The fund group was followed by Credit Suisse, which saw €3.7bn of inflows, with €2.8bn coming from its equity funds.

Despite Brexit, the top 10 best selling long-term funds gathered net inflows of €8bn in June with the PK CSG World Equity I fund seeing the largest inflows of €3.1bn.

Meanwhile, the European ETF market netted nearly €8bn of new money in the second quarter of 2016, says Morningstar, declining from the €11bn of net inflows for the first quarter. Assets under management at the end of the second quarter increased to €482.4bn, a 4.2 per cent rise from the end of the previous quarter.

Inflows were highly concentrated into commodities ETFs, mostly gold, with €3.3bn net sales, representing the best half-yearly outcome on record for European exchange-traded-products that provide exposure to the safe-haven asset class, Morningstar finds.

Morningstar associate director of passive strategies research Jose Garcia-Zarate  says: “Given the general investment environment, we see these figures in a positive light. Investors had a tough time in the second quarter of 2016. Most prominently, the uncertainty over the potential result—and implications—of the UK’s referendum on European Union membership warranted a cautious approach to investing.

“The two most commonly adopted strategies were either to sit tight and wait to see the actual outcome of this key risk event, or to seek shelter in presumed safe havens.”