“In 2023, the high level of interest rates and the more gradual tightening stance spurred significant net inflows into money market funds and bond funds,” said Bernard Delbecque, senior director for economics and research at the trade group Efama, explaining the turnaround in European fund flows in 2023 in a recent report. Photo: Efama

“In 2023, the high level of interest rates and the more gradual tightening stance spurred significant net inflows into money market funds and bond funds,” said Bernard Delbecque, senior director for economics and research at the trade group Efama, explaining the turnaround in European fund flows in 2023 in a recent report. Photo: Efama

European investment funds rebounded significantly in 2023, attracting €304bn in net inflows, marking a departure from the previous year’s outflows and pushing net assets above the €20trn threshold, said trade group Efama on Friday.

Marking a year of recovery, the European investment fund market witnessed net inflows totalling €304bn in 2023, the European Fund and Asset Management Association on Friday 1 March 2024. This development contrasts with the €273bn net outflows recorded in 2022, indicating a shift in investor sentiment across the continent, noted Efama.

Undertakings for collective investment in transferable securities (Ucits) and alternative investment funds (AIFs) together attracted net inflows, reversing the previous year’s net outflows. Ucits registered net sales of €202bn in 2023, compared to negative net sales of €167bn in 2022, while net inflows into AIFs reached €102bn, compared to net outflows of €105bn in 2022. This influx led to an 8% increase in the net assets of European investment funds, pushing the total above the €20trn mark once again, stated Efama.

Equity funds experienced a shift in investor interest, with equity exchange-traded funds leading the way. These ETFs attracted €101bn in net new money, reflecting a preference for ETFs over non-ETF equity investments, which experienced net outflows of €94bn.

Bond funds saw a reversal in their fortunes with net inflows of €137bn, as investors responded to the stabilisation of interest rates and the prospect of future rate cuts, marking a significant change from the previous year’s net outflows of €127bn.

The report also highlighted a change in investor preferences, with multi-asset funds recording their first yearly net outflows since 2008, totalling €103bn.

Money market funds reported strong performance, driven by an inverted yield curve that offered higher returns for short-term investment products. With net inflows of €172bn, these funds played a crucial role in investor portfolios.

ETFs achieved a record-setting year with net inflows of €169bn, emphasising their growing appeal due to cost efficiency and trading flexibility, noted Efama.

Bernard Delbecque, senior director for economics and research at Efama, noted in trade group’s report that the impact of high interest rates and a gradual approach to monetary tightening on the investment landscape. These factors contributed to increased net inflows into money market funds and bond funds, underscored Delbecque. Conversely, actively managed equity funds saw reduced investor interest, while exchange-traded funds captured a significant portion of net sales within the equity fund sector, remarked Delbecque.

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