In 2022, the net assets of Ucits (undertakings for the collective investment in transferable securities) and alternative investment funds (AIFs) fell by 12.4%. This is the highest level since 2008. Nearly 90% of this decline was due to the fall in the value of equities and bonds and the remaining 10% to investor outflows, the European Fund and Asset Management Association (Efama) said in its latest statistical publication.

Net outflows reached €184bn for Ucits and €101bn for AIFs.

Net outflows from UCITS equity funds remained relatively low at €70bn, or 1.1% of total assets. Equity funds suffered much more with a withdrawal of €219bn. This level of withdrawal should be put into perspective, however, mainly because a number of pension funds in the Netherlands and Denmark had to unwind positions in response to the new IFR/IFD prudential rules.

Bond funds were heavily penalised by rising interest rates. Ucits bond funds had to face a net outflow of €129bn, compared to only €4bn for AIF bond funds.

Luxembourg weakens against Ireland

Interestingly, while Luxembourg remains the number one domicile in Europe, ahead of Ireland for Ucits funds, it was the most affected by outflows (-€219bn), while Ireland experienced a net subscription of €38bn.

Return to a positive dynamic

But Efama notes that the negative spiral has been broken as of the fourth quarter of 2022.

“Net outflows from long-term Ucits funds decelerated sharply in the last quarter of 2022, as net sales of bond funds returned to positive territory and net outflows from equity funds fell sharply. With inflation easing and official Fed and ECB interest rates approaching the highest levels seen in the last 20 years, 2023 should be a good year for bond funds. It is less clear how demand for equity funds will evolve in the coming months, despite the strong start, given the remaining uncertainties about the resilience of the global economy in the face of tightening monetary policy and the war in Ukraine,” commented Bernard Delbecque, senior director for economics and research at Efama.

In the fourth quarter of 2022, net assets of Ucits and AIFs increased by 0.8%. More importantly, for the first time this year, net sales were positive (+€75bn), driven by net sales of Ucits, which reached €128bn, while AIFs still posted net outflows of around €53bn. Net outflows from long-term Ucits slowed to €36bn, compared with €108bn in Q3 2022. In contrast, net sales of money market funds reached a record level (€170bn).

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