The European equity fund market has shrunk by 46% since end 2007 to EUR314.5bn in assets under management (AUM) at end-September 2011, according to an update on European equity funds issued by Fitch Ratings.
This sharp decline reflects negative returns of -27% and investors’ redemptions of EUR115.5bn (20% of initial AUM) over the period. By contrast, US equity funds have experienced only 5% of outflows over the same period, emerging market equity funds net new money has remained flat and global equity funds have attracted 17% of inflows. "
Clearly, European equity has suffered an exodus, fuelled by investors’ concerns over the eurozone sovereign crisis," says Charlotte Quiniou, Director in Fitch’s Fund and Asset Manager Rating Group.
The report also identifies a wide performance dispersion among the universe of European equity funds, with a 28%-gap between the average annual performance of the top and bottom quartiles over five years. However, outperformances are not consistent over time.
"Almost 50% of the pre-crisis best performing funds are now underperforming their peer group’s median, and volatility coupled with structural economic changes have spoilt certain track-records," says Quiniou.
In the European equity fund universe, still dominated by large capitalisation, core-style and moderately concentrated funds, the report notes that only 36% of the funds managed to attract positive net flows over the past year.
"Among the 800 managers that are active in the European equity field, few are capturing new money. Interestingly, most of this new money is going to independent houses," says Aymeric Poizot (pictured), Managing Director in Fitch’s Fund and Asset Manager Rating Group.