Image Source: Pixabay

The European fund industry enjoyed inflows of €620.2 bn over the course of 2024. That said, there are two main trends visible in the fund flows numbers which may be because most of the asset managers in Europe are not happy with their inflows over the course of the year.

Firstly, there was a clear trend in the direction of ETFs, as European investors invested €256.4 bn in these products over the course of the year. Secondly, European investors bought further into money market funds (+€253.0 bn). This trend was driven by the still inverted yield curves in the major economies.

These two trends may put a burden on the balance sheets of fund promoters since both product categories are considered as low-cost products. This means that the respective promoters may generate only comparably low revenues from these products. As a result, the high inflows may hit the future earnings of the respective fund promoters.

That said, there were also two main trends which become visible if one analyzes the fund flows underneath the headline levels.

An analysis of the fund flows by product type shows that at the asset type level, European investors sold actively managed equity funds (-€62.2 bn) while they bought equity ETFs (+€198.5 bn). This switch underpins my former point that the estimated net flows of 2024 may impact the balance sheets of the fund promoters. To be clear, this does not mean that all actively managed equity funds faced outflows. Quite the opposite is true—there are a number of active managed equity funds which enjoyed healthy inflows over the course of the year.

On one hand, it was somewhat surprising to see that European investors preferred actively managed bond products (+€258.2 bn) over bond ETFs (+€37.7 bn). This may mean that the investors can expect some turbulences on the bond markets, or that the current product offering in the bond segment does not fulfill the needs of investors.

Graph 1: Estimated Net Flows by Asset and Product Type Over the Course of 2024 (in bn EUR)

(Click on image to enlarge)

Source: LSEG Lipper

The second trend becomes apparent when one analyzes the estimated net flows over the course of 2024 at the SFDR classification level. This analysis shows that products classified under article 9 of the SFDR were the only product group which faced outflows (-€27.8 bn), while products classified under article 8 of the SFDR (+€280.4 bn) enjoyed the highest inflows. This trend shows that European investors may focus more on the overall impact of the related investment strategies in the segment of ESG-related rather than the actual SFDR classification of the respective products. These numbers also show that sustainable investing has not disappeared from the radar of European investors.

Obviously, there are more underlying trends to discover in the fund flows underneath the headline numbers. We will publish a more detailed analysis within our annual European fund industry review, which will be published in March 2025.

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