Total net assets of UCITS and AIFs bounced back in Q2 2020 to cross the €17 Trn threshold again. Net sales of UCITS were €272 Bln, the highest level seen since Q1 2015. The below chart outlines the net sales of UCITS over the previous six quarters:
Net Sales of UCITS – EUR Bln
Money market funds attracted the largest inflows of all categories (€136 Bln) and the largest ever level of quarterly inflows into money market funds was witnessed. This reflects a cautious approach by some investors as they were unsure about the further economic impact of the Covid-19 crisis.
Net sales of UCITS bond funds were €69 Bln and equity funds were €33 Bln in Q2.
The second quarter was somewhat characterised by a rebound in investor sentiment as the rate of Covid-19 cases slowed and lockdown measures were eased across Europe. The ECB expanded its pandemic emergency purchase programme to €1.35 Trn in Q2.
In terms of economic data, the Eurozone economy shrank by 3.6% in Q1 and the PMI fell to 13.6. It recovered to 47.5 in June (50 represents expansion).
Sources: EFAMA, Schroders, Broadridge.
Country Spotlight: Norway
Norway is a significant fund domicile in terms of net assets with €120 Bln as at Q2 2020 with a peak of €135 Bln in Q4 2019. The below chart depicts net asset movements since 2016.
Norwegian Domiciled Funds Net Assets (EUR Bln)
Approx. 60% of total assets are held in equity funds. The market is dominated by local players in the Nordic region such as DNB, Nordea and Storebrand.
Norway has the world’s largest sovereign wealth fund with AUM of €1.02 Trn as at July 2020. It saves revenue from the oil and gas industry and is worth 3 times Norway’s GDP. The sovereign wealth fund employs a sustainable investment approach with a key focus on climate change, board composition and executive remuneration.
Although Norway is not in the EU, it is a member of the EEA and UCITS can avail of the passport to distribute into Norway. There are just under 2,000 Irish funds registered for sale in Norway, the 12th most popular market for Irish funds. The key distribution channels, in order of popularity, are private banks, fund of funds, retail banks, insurance companies, execution only platforms and IFAs.
Sources: EFAMA, Irish Funds, CNBC
The Quarter in Numbers
- 0.83 The number in € Trn of European ETF net assets Q2 20
- 1.44 The number in € Trn of money market fund net assets Q2 20
- 0.79 The number in € Trn of real estate fund net assets Q2 2020
- 38 The percentage of European net assets in AIFs
In Q1 2020, Irish funds experienced the 2nd largest outflows in Europe at €40.7 Bln. In Q2 net assets recovered to surpass €3 Trn again.
Total Assets of Irish Domiciled Funds
In October 2020, the CBI published the outcome of its thematic review of the implementation of its CP86 framework for governance and oversight in ManCos (including SMICs). The CBI stated that firms will be required to have 3 locally based full time employees. Firms are required to have an action plan in place by March 2021 to ensure compliance.
Irish Funds data showed that 56 firms established offices in Ireland or added to existing operations in the first half of 2020. (mostly Brexit driven). The industry in Ireland now includes 150 firms and 16,000 employees.
Sources: Irish Funds, Ignites, A&L Goodbody
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