Market observers tend to say that investors chase returns, as they often buy the funds that demonstrate a high, or even the highest, performance. We saw that 8 funds available to investors in Europe showed an outstanding performance of more than 100% over the course of 2023.

Therefore, it makes sense to analyze the estimated net fund flows for these products to see if such an assumption is true. To have a larger peer group, I extended that analysis to the 20 top-performing funds in Europe over the course of the year.

According to the Lipper database, the best-performing fund in Europe over the course of 2023 (VanEck Crypto and Blockchain Innovators UCTS ETF USD A) had a performance of 263.36%, while the last on the list (Franklin Metaverse UCITS ETF) still returned 65.23%.

Graph 1: The 20 Top-Performing Funds in Europe – 2023

(Click on image to enlarge)

Source: LSEG Lipper

A closer look at the list of the 20 top performers for 2023 shows that 12 products were ETFs, while 8 were mutual funds. Even more surprising, only 3 funds on the list were not in the Equity Information Technology classification. At a closer look, 17 of the 20 top-performing funds were related to at least one of the following sectors: blockchain, crypto, digital assets, fintech, internet, metaverse, and semiconductors.

Given the fact that the majority of funds on the list of the 20 best-performing funds in Europe are sector funds, it is worthwhile to have a view on the assets under management (AUM) held by these funds. As to be expected, the AUM of these funds were rather small since no fund held assets above one billion euro at the end of the year, while the smallest fund held only 0.3 billion euro. Overall, these funds accounted for AUM of 1.2 billion euro at the end of 2023.

Graph 2: Assets Under Management in the 20 Top-Performing Funds in Europe – (Dec. 31, 2023)

(Click on image to enlarge)

Source: LSEG Lipper

Despite the stunning average performance of 117.23%, the 20 best-performing funds accounted only for overall AUM of 2.3 billion euro at the end of 2023.

So, have European investors bought into these funds over the course of 2023? The short answer is a clear "no," since the combined estimated inflows of the 20-top performing funds were only 211.96 million euro. Even more surprising, 4 of the funds faced outflows over the course of the year despite their stunning performance.

It was even more surprising to see that 4 of the 20 best-performing funds faced estimated net outflows, while 2 funds seemed to have no estimated net in- or outflows at all over the course of the year.

Graph 3: Estimated Net Flows in the 20 Top-Performing Funds in Europe – 2023

(Click on image to enlarge)

Source: LSEG Lipper

Did the winners take it all? The answer to this question is once again a clear "no," since the 3 best-performing funds enjoyed estimated net inflows of only 45.1 million euro, while the number 4 and 5 funds on the list faced outflows of 1.5 million euro.

The best-selling fund of the 20 top-performing funds was Amundi MSCI Semiconductors ESG Screened UCITS ETF A, with estimated inflows of 102.1 million euro. This might be somewhat surprising since the fund is only in position 17 out of 20.

With regard to the above, one can conclude that European investors were not chasing returns in equity funds over the course of 2023. Nevertheless, this leaves the question open of whether they will buy into these funds at the beginning of 2024.

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