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Total net assets of UCITS and AIFs grew by 2.8% in Q3 2020 to reach €17.58 Trn. Net sales of UCITS were €145 Bln. The largest inflows were in French, Irish and Lux UCITS. The below chart outlines the net sales of UCITS over the previous six quarters:

Net Sales of UCITS – EUR Bln

Net Sales of UCITS - EUR Bln

Net inflows to bond funds decreased while inflows to equity funds and multi-asset funds increased. This reflected a relatively optimistic investor outlook for financial markets.

Whilst allocations to money market funds decreased, they remained relatively high which reflects a lingering degree of caution among investors.

Eurozone equities were almost flat during Q3. Improvements in economic data stalled as worries over rising Covid 19 infections in many EU countries resurfaced. The Purchasing Managers Index (“PMI”) fell to 50.1 in the Eurozone with above 50 representing business activity expansion.

In terms of fixed income, European government bonds performed well as sentiment toward the region improved following the EU announcement of a €750bn pandemic recovery fund in July 2020.

Sources: EFAMA, Schroders.

Country Spotlight: South Africa

The South African funds industry is substantial with AUM just under $200 Bln. Approximately 88% of these assets are held in domestic funds with the domestic market having a 37% retail vs 63% institutional split.

South Africa is the 23rd most popular market for distribution of Irish funds. The number of registrations is as follows:

Number of Irish Funds Registered in South Africa

Number of Irish Funds Registered in South Africa

A foreign fund looking to register for sale in South Africa must enter into a representative agreement with an S.A. entity approved by the regulator (FSCA) or maintain a representative office in South Africa. Foreign funds must register under the S65 licensing regime of the CIS control act. Minimum disclosure requirements for foreign funds include fee levels for the most expensive class marketed, distribution levels over the past 12 months in addition to highest and lowest performance figures since fund inception.

The main distribution channels in the market are financial advisors, insurance companies, platforms, asset consultants and local multiasset funds investing in offshore funds.

Sources: Irish Funds

The Quarter in Numbers

  • 0.87 The number in € Trn of European ETF net assets Q3 2020
  • 1.48 The number in € Trn of money market fund net assets Q3 2020
  • 0.83 The number in € Trn of real estate fund net assets Q3 2020
  • 38 The percentage of European net assets in AIFs

Irish Eyes…

In Q1 2020, Irish funds experienced the 2nd largest outflows in Europe at €40.7 Bln. In Q2 & Q3 net assets recovered to surpass €3 Trn again.

Total Assets of Irish Domiciled Funds

Total Assets of Irish Domiciled Funds

In November 2020, the CBI highlighted, following its inspections of local firms, that it has noted weaknesses in their compliance with fitness & probity standards. It noted that many firms were not undertaking robust compliance testing of their fitness & probity processes.

In the same month, the CBI also published the outcome of its thematic review of MiFID authorised firms’ compliance with best execution requirements. It noted a failure at many firms to demonstrate effective oversight, monitoring and assurance of how these requirements were  ulfilled.

Sources: Irish Funds, Ignites

Download your copy of Funds, Flows & Facts – February 2021 here

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