European asset managers have seen inflows of $54bn so far in 2023, marking a reversal from 2022, the worst year for outflows since the global financial crisis. A report from Bank of America Global Research showed risk appetite rising, as markets rally in response to more robust economic growth, lower inflation, and slower rate rises.
Weekly flow momentum faded, however, as equities reached year-to-date highs. The bank’s European equity strategists saw downside risks, forecasting that the economy is about to experience meaningful headwinds from monetary tightening.
Coinciding with a slowdown in central-bank rate hikes, fixed income saw the largest inflows so far this year, at $32bn. All bond categories have seen inflows, led by investment grade bonds, as yield became more attractive. Equities also attracted inflows of $28bn in the year to date. EM and Global equities were up, but all other equity strategies saw outflows, with the biggest in European equities.
The largest inflows were recorded in Emerging Asia, fuelled by China reopening and EM optimism, with Chinese stocks the third best-selling asset class. Demand for European corporate bonds was also high, in line with sector data for investment grade bonds. Global ESG themes like sustainable growth and energy transition also saw significant inflows.
The biggest withdrawals in the year-to-date have been from alternative risk premia, followed by European stocks. High yield has also performed poorly.
Positive inflow figures in 2023 follow one of the worst years for European asset management flows since the Global Financial Crisis, with total net outflows of $320bn. The last time the industry saw net outflows was in 2011. Bank of America analysts said that ‘After significant outflows in 2022, we expect a rebound in 2023. But we expect organic growth to be below its long-term average of 3-4%, given the rate and recessionary pressures’.
The firms with the biggest equity outflows in 2022 were Allianz, Baillie Gifford, Sjunde AP-fonden, Morgan Stanley, and T Rowe Price, while BlackRock, Vanguard, Deka, Mediolanum, and Zurcher Kantonalbank saw the biggest inflows.
The firms with the biggest outflows in fixed income last year were PIMCO, Nordea, Schroders, UBS and AllianceBernstein. The top bond gatherers included BlackRock, CaixaBank, Vanguard, Zurcher Kantonalbank, and BBVA.