European long-term open-end funds returned 290 billion euros to their unitholders in March, bearing the full brunt of the Covid-19 crisis. Outflows were particularly high in the bond sector. Read more.
Bond funds hardest hit
According to Morningstar data, European open-ended funds posted a record outflow of 290 billion euros in March. Taking into account declines in asset valuations, assets under management would even have fallen by around 1,000 billion euros.
The bond sector was the hardest hit, with withdrawals of almost 140 billion euros corresponding to 40% of 2019 inflows. This massive outflow surpassed the previous monthly record set in October 2008 (-54 billion euros).
Among French players, the giant Amundi is the most affected, with over 30 billion euros of outflows recorded in March. Next in line is Natixis (16 billion euros of outflows), followed by BNP Paribas AM (8 billion euros).
As a result of the market collapse, investors have been selling to raise cash. All of which is putting the sector under pressure.
Massive withdrawals from life insurance
European funds are not the only ones to have suffered a strong redemption movement. Indeed, in March, life insurance deposits fell by a net 2.2 billion euros, according to figures published by the Fédération Française de l'Assurance (FFA), a level not seen since 2011.
There are several reasons for this outflow. Firstly, the storm that hit the financial markets at the beginning of the year made it difficult to sell life insurance during the period of confinement. In addition, with interest rates at record lows, this long-term savings product is less and less valued. Savers are turning to the Livret A, which offers the advantage of being tax-free and liquid.
Finally, with the confinement, the French have taken the opportunity to return to the stock market. A study by the Autorité des marchés financiers (AMF) shows that over 150,000 investors have entered the market for the first time since 2018. Their profile differs from that of equity market regulars. Indeed, new investors are between 10 and 15 years younger, and bet small amounts. The French stock market watchdog reports that 580,000 individuals invested in SBF 120 and CAC 40 stocks between February 24 and April 6. Over the last 5 weeks, purchases of French equities by individuals have thus increased by a factor of 4 compared with the same period in 2019.
It therefore appears that European open-ended funds, like life insurance, suffered a sharp outflow in March, with savers giving greater preference to risk-free investments such as Livret A passbook savings accounts.