Consultancy MackayWilliams has predicted an uptick in pan-European fund flows for the rest of the year, saying the slump seen at the start of 2016 was not severe enough to prompt revisions to its forecasts.
The firm’s joint chief executive, Diana Mackay, said the €20bn (£15.7bn) in net outflows seen in the first quarter was broadly in line with MackayWilliams’ estimates, and predicted a return to growth later this year.
Fears of a global growth slowdown rattled equity markets in January and February, meaning significant redemptions for the funds industry.
The first-quarter outflows compare with net sales of between €100bn and €150bn for the first three months of 2014 and 2015 respectively.
Ms Mackay said the consultancy was maintaining a forecast of €100bn in net sales for 2016, though this figure would represent just a third of that seen in the previous two years.
“We are expecting some recovery as the year wears on, if only because investors really have nowhere else to go. Having looked at the latest data we’re not inclined to change our forecast,” she said.
Ms Mackay and publications editor Mark McFee noted that a recovery in flows in March was aided by a return to inflows for bond funds.
“We began to see the green shoots of improvement in sentiment towards bonds back in January,” Mr McFee said.
“[It] appears to be linked to the market view that the US Fed may now be gradually rowing back its commitment to rate hikes earlier this year. The [European Central Bank] also contributed by committing to buying up a chunk of corporate debt each month.”
The pair said they were forecasting further inflows into fixed income in both April and May, but Mr McFee said some strategic funds were struggling more than their traditional peers.
“There’s still one fixed income sector that’s really struggling, and that’s flexible bonds. Flows in the past have been associated with just a handful of products, but recently the redemptions seen have been spread among a multitude of funds.”
In total, 22 offerings in this space lost more than €100m in the first quarter, he said.
Mr McFee noted that underwhelming returns from such portfolios might have “tested investor patience”, given many products had been beaten by more conventional sovereign or corporate bond funds.
In keeping with the trend seen in the UK market, MackayWilliams emphasised that alternatives were becoming more popular among investors.
“Aside from the ongoing strength in the asset allocation alternative space, the other area to watch is alternative equities,” he added.
