As of 30 September 2021, the total net assets of collective investment schemes--including UCIs subject to the 2010 law, specialised investment funds and SICAVs--now amount to €5,601.512bn. This decrease of €45.925bn over one month is attributable to the market trend of €57.187bn (-1.01% over one month).

The development of net capital investments, which increased by €11.262bn (+0.2% over one month), was not sufficient to compensate for the stock market fluctuations.

Net assets in mutual funds dropped to €4.1trn in March 2020, the month that the World Health Organization declared the coronavirus crisis a global pandemic, from €4.6trn a month earlier. But there has been a steady growth overall since then.

Contrasting developments in the equity markets

“In developed markets, the European equity mutual fund category performed negatively against a backdrop of declining leading economic indicators, persistent supply chain bottlenecks and higher inflation, despite the start of NextGenerationEU transfers and continued accommodative monetary policy from the European Central Bank (ECB). The deceleration of US growth, supply chain issues, continued high inflation and the announcement of possible tapering by the Federal Reserve (Fed) weighed on US equity markets, resulting in a loss in the US Equity PFT category, despite a strong appreciation of the dollar against the euro. Expectations of a political change in Japan in the near future supported the Japanese equity mutual fund category,” the Financial Sector Supervisory Commission (CSSF) said.

“In emerging markets, the Asian equity fund category, despite divergent developments in the region, recorded a negative performance overall, mainly due to weaker growth in China, tighter policies and regulations in some Chinese economic sectors, as well as the debt problems of property developer Evergrande. For the Eastern European equity fund category, the overall positive performance was mainly driven by the Russian equity market, which benefited from rising energy prices. Political uncertainties in countries such as Brazil and falling metal prices were the main reasons for the negative performance of the Latin American equity fund category,” it said.

“In September, the equity mutual fund categories recorded overall positive net capital investment, mainly due to inflows into the global equity mutual fund category.”

Inflation weighs on the bond market

Turning to the bond market, fears of rising inflation led to an increase in long-term government bond yields in September--i.e. bond prices rose--on both sides of the Atlantic.

“The euro-denominated bond mutual fund category closed in negative territory amid rising yields on highly rated euro-denominated bonds. Viewing the rise in inflation in Europe as a temporary move, the ECB announced the continuation of its accommodative monetary policy to avoid a tightening of financial conditions,” the CSSF said.

“Against the backdrop of sharply rising inflation in the US, highly rated USD-denominated bonds also saw a rise in yields. As a result, the Fed signalled the possible start of its interest rate reduction programme in the near future. On the fiscal front, Congress is still looking for a solution to avoid a shutdown. Investment grade corporate bond spreads were not significantly affected by economic developments in September. Overall, despite a significant appreciation of the USD against the euro, the US dollar bond fund category delivered a negative performance,” it said.

“The emerging market bond fund category ended the month with a negative performance against a backdrop of rising US yields, interest rate hikes by several emerging market central banks and divergent developments in emerging market currencies. In September, the fixed income UCI categories recorded an overall negative net capital investment, with the USD money market UCI category recording the largest outflow,” the CSSF concluded.

There are currently 3,532 UCIs in the market for 14,474 active sub-funds.

This story was first published in French on . It has been translated and edited for Delano.