NEWSLETTER: Cold Comfort Farm

The latest quarterly statistics from Efama (the European Fund and Asset Management Association), released today, tell a bitter tale of inexorable and gargantuan decline ... The latest quarterly statistics from Efama (the European Fund and Asset Management Association), released today, tell a bitter tale of inexorable and gargantuan decline.

Outflows from UCITS in the nine months to 30 September 2008 totalled €193bn. This compares with inflows over the same period in 2007 and 2006 of of €47bn and €348bn respectively. Equity funds were the hardest hit with redemptions totalling €134bn, followed by balanced funds (€105bn) and bond funds (€16bn). Money market funds, by contrast, achieved inflows of €72bn.

Efama’s explanation for the sharp falls contains a warning of worse to come. “The stunning magnitude of the recent decline in stock prices and the chaos in the credit markets that started in 2007 engendered a deep loss of investor confidence, accelerated in September with the bankruptcy of Lehman Brothers,” the association says, reminding us that, however long ago it may seem, the collapse of Lehman Brothers actually happened just two months ago at the end of September.

That being the case, it’s hard to see how Efama’s fourth quarter figures can avoid being much, much worse than those before us today – pushing whole-year losses to record levels.

As it is, some of the third-quarter figures are not quite as bad as were seen in the first quarter. Equity redemptions totalled €43bn in the third quarter compared with a stonking €76bn in the first, while outflows from balanced funds stood at €6bn in the third quarter and €12bn in the first quarter.

The compensatory inflows to money market funds that stop the year-to-date figures looking like a complete rout almost all occurred in the first quarter, however. By the third quarter, money funds could rustle up just €8bn of new money and as result the total net redemptions in the third quarter of €92bn are more than double those in the first quarter (€42bn).

Efama takes comfort from the fact that, “As a percentage of UCITS assets, net redemptions in January-September remained limited to 3.5 percent.” This, the European association suggests, shows that “investors on average are holding their UCITS on a net basis despite plummeting asset prices”.

It’s cold comfort, however. These are the worst figures the industry has seen for years and it ain’t over yet; probably not by a very long shot.

Fiona Rintoul, Editorial Director
©2008 Funds Europe

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