Fund flows are the ultimate way to measure sentiment. Headline grabbing numbers show you where assets are being piled into or pulled from.
For your own asset allocation they’re an indicator of if you’re going with the herd or swimming against the tide.
But the fact is these headline numbers are hiding the truth. They mask what’s going within the sector. By that I mean manager moves and their associated impact.
When manager changes take place fund selectors tell us they’ll make a quick exit. As high profile departures and hires are made, the month-on-month numbers quickly become meaningless.
Citywire Discovery, our fund manager analysis system, now contains an asset flows module.
I was interested to see what happened to flows in the Equity Europe sector since the summer last year. As deflation was clearly visible in the eurozone, talks of quantitative easing became more pronounced so did investors jump in ahead of the announcement to anticipate an equity rally?
The universe looks at all funds run by active managers tracked by Citywire. Between the end of July and end of December the sector saw estimated net outflows of €8.7 billion. So no pre-QE stampede, but a rush for the exit.
Funds in focus
Our analysis shows the largest net outflows coming from Nigel Bolton’s BGF European fund (€1.8 billion), followed by Franklin European Growth (€1.6 billion) and OYSTER European Opportunities (€1.1 billion).
These three funds alone account for just over half the net outflows. But two of them, Franklin and OYSTER, are due to manager moves, not an asset allocation call.
Curiously enough Clements is now at the helm of OYSTER European Opportunities and will be looking to reverse the flow.
We can only speculate about the huge redemptions in such a short space of time from BlackRock’s BGF European fund whose assets have shrunk by a third, but the manager’s influence is evident.
Among the next largest outflows can be attributed to Leon Howard-Spink's fund at Schroders. He stopped managing the Schroder European Alpha Plus fund in the Equity Europe ex UK sector in June 2014 but still manages Schroder ISF European Special Situations in the Equity Europe category. Net outflows on this fund are estimated to be around €660 million between the end of July and end of December 2014.
It’s clear sector level numbers need further scrutiny to understand what’s going on behind the scenes. Manager level analysis which we track needs to go hand in hand.
Will investors keep money in the sector after these key moves? With some managers having their funds soft closed new ideas will need to be explored. Or will allocators who reaped the rewards from an early move a couple of years ago, decide the smart money has already been made?