FE Trustnet News and Research

Investors flee Europe as redemptions skyrocket
International Adviser
By International Adviser  30 Aug 2010

The European funds industry suffered a mass exodus of client money in May, with investors redeeming a net total of €18bn ($23.3bn) during the month.
According to the latest data from Lipper FMI, both equity and money market funds saw redemptions, with the latter responsible for redemptions of €14.7bn alone over the month, despite them normally being seen as a safe haven in a more turbulent market environment.

The redemptions in money market funds recorded by Lipper are in stark contrast to the global figures provided by EPFR Global for the first week in July, which show an inflow of $33.5bn – a 78-week high for the money market sector, perhaps indicating a marked improvement in investor confidence.

The only major asset classes unaffected by the exodus were the mixed asset and bond categories, although both saw their net inflows drop to the lowest points since this time last year (bond €5.6bn, mixed €3.4bn).

In addition, investor reaction to the potential vulnerability of some regions was evident. European bond funds were redeemed heavily, with the European short-term bond sector seeing net redemptions of €2.3bn. Emerging market bond sales also slowed on less positive regional news, but still took €357m.

Overall, the best-selling sector for the month was German equities, with net sales of €6.5bn, despite the DAX falling by 2.8% during May. The top five funds in this sector were ETFs, possibly suggesting savvy investors buying when down, but also some short-selling distortions.

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