Although Austria faces inflation and interest rate hikes, derivative and sustainable investment funds stand tall, reports Benjamin David.

Since early 2022, fund volumes for VWGs – securities management companies in Austria – fell 14% to €187.7 billion. According to the Association of Austrian Investment Companies (VÖIG), the war in Ukraine, higher energy prices, inflation and central bank interest rate hikes were felt in its capital markets.

According to a VÖIG press release on January 13, net capital outflows in Austria were at €599.8 million, with institutional investors experiencing outflows of -€623 million and institutional mutual funds -€468.7 million. However, inflows of €491.6 million were attributable to retail mutual funds. Asset management funds achieved the highest net inflows of around €701.8 million, states VÖIG, who claim the total amount of distributions was €1.7 billion, and price losses amounted to approximately €28.8 billion.

Derivative funds were the performance winners in 2022 over one year, with a return of around 17.5%, followed by equity funds for Central and Eastern Europe, with a return of approximately 3.6%. All other categories over one year performed negatively, notes VÖIG.

Over ten years, Austrian equity funds returned 3.5% pa and bond funds in foreign currency returned 0.4% pa. The latter were just ahead of bond funds denominated primarily in euros, which returned around 0.3% pa.

Sustainable investments stand tall

Sustainable investment funds achieved a fund volume in 2022 of €81.6 billion – a volume growth of 11.3% since the beginning of the year. Such funds also achieved a net cash inflow of €4.1 billion.

However, the one-year performance of sustainable equity funds was -15.3%, which compares to 16.1% for sustainable derivatives funds and 2.1% for sustainable real estate funds. Across a ten-year range, sustainable equity funds increased in value by 5.5% annually, states VÖIG, and sustainable mixed-asset funds show an annual increase of 2.2% pa.

The figures support a larger trend that positions European investors as the biggest contributors to sustainable investments in 2022, according to data by iShares, the ETF arm of BlackRock. Throughout 2022, $54 billion was added to Emea-listed sustainable ETFs and similar exchange-traded products (ETPs), whereas US-listed sustainable ETPs experienced total flows of just $5 billion.

Sustainable investment fund launches were propitious for Austria in 2022. As VÖIG president Heinz Bednar says: “The investors not only want to achieve returns with their involvement in the markets but also want to transform the economy in the long term and are therefore invested for the long term.

“They continue their commitment even in times of crisis and can therefore reap the additional long-term returns of capital market investments compared to other investment opportunities. The net change in funds of €4.1 billion in the area of sustainable investment funds shows this pleasing development very clearly.”

Bednar says he is more confident for 2023 – a year that “started well” with improvement for many asset classes.

“There are clear signs that inflation has reached a peak. Many stocks have a reasonable risk/reward ratio and bond markets are attractive after many years due to interest rate hikes.

“Despite the major challenges, investors have held on to their fund units and continued to increase their shares.”

The environment for investors “is beginning to brighten”, Bednar says.

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