NEWSLETTER: Wherefore art thou, New Dawn?

Does the recent equities rally constitute the next bull market or is it a false dawn? The answer is far from clear and many managers – BlackRock is an example from today’s post – are taking the opportunity to promote the absolute return funds. fionaname3.jpgBut however uncertain the investment climate remains, Efama statistics for the first quarter of 2009, released today, show that European investors have regained some small measure of confidence. According to Efama, UCITS funds recorded net inflows of €22bn in the first three months of 2009 ending a run of six consecutive negative quarters since the global financial crisis began in the summer of 2007.  

The first-quarter inflows were concentrated in the money market sector, which saw net new sales of €52bn. All other sectors saw net outflows and total net redemptions from what Efama calls ‘long-term UCITS’ were €31bn. While hardly a triumph, this figure contrasted favourably with the fourth-quarter 2008 total of -€140bn. 

 “The evolution of monthly net sales of UCITS confirms that investor fear about financial assets receded sharply after the financial panic of October, leading to net positive inflows into equity and bond funds in January,” Efama explains.  “Even if new market turbulence in February and March unnerved investors again, the outflows remained small, suggesting that the negative dynamics that operated between the start of the financial crisis and October 2008 has lost momentum.”

Overall, UCITS’ assets under management fell in the first quarter of 2009 by 1.3% – largely due to market falls.

This figure need frighten no one. The truly scary statistic is the drop in equity fund assets that occurred between 31 December 2007 and 31 March 2009. Over this 15 month period European equity fund assets were more than halved dropping from €2,339bn to €1,097bn. This took equity funds’ share of total European assets down to 28% from 40% at the end of 2007.

Meanwhile, a market-by-market look at Efama’s first quarter statistics also reveals some interesting trends. The only market (apart from tiny Liechtenstein) to enjoy any kind of substantial growth in AUM over the quarter was Turkey. Turkish AUM in UCITS rose by 14.5% to €12.8bn from €11.2bn.

It would be tempting to talk of a new dawn in the east were it not for the fact that other eastern markets took a hammering. Poland was down 18.9%, Hungary 14.8%, Czech Republic 14.2% and Greece 13.4%.  

But is, of course, a very different market from these others. A new dawn in the southeast perhaps?  ©2009 funds europe

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