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Luxembourg and equities dominate fund flows

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Detlef Glow, Lipper’s Head of EMEA Research, and Christoph Karg, Content Specialist Germany & Austria write in the third quarter review of European fund flows that Luxembourg continues to dominate the European fund market.

 The firm finds that as of the end of September 2015 there were 31,982 mutual funds registered for sale in Europe. Luxembourg, hosting 9,136 funds, holds the top position,  followed by France, where 4,631 funds were domiciled.
 
The report says that for the third quarter of 2015, 453 funds were created in Europe, while over the same period 322 funds were liquidated and 324 were merged. With 646 funds (322 liquidations and 324 mergers) being withdrawn from the market and only 453 new products being launched, the European fund universe shrank by 193 products during the third quarter.
 
By asset class, equity funds dominate in Europe, with 37 per cent of the funds available for sale, followed by mixed-asset funds at 27 per cent; bond funds at 21 per cent, while money market funds represented 4 per cent. The remaining 11 per cent of  funds deemed ‘other’ comprised real estate, commodity, guaranteed and funds of hedge funds.
 
Looking forward, the report finds that since the European fund industry is enjoying high net inflows for 2015, it is surprising that the industry is still cautious with regard to fund launches.
 
“There have been a number of mergers between asset managers over the last few years, which has led to a number of duplications in the respective product ranges that need to be cleared to achieve economies of scale. In addition, there is still a lot of pressure on asset managers with regard to profitability, which is also driving the cleanup of the product ranges,” the report says.
 
Lipper believes that  this pressure might even increase, once the new regulatory frameworks are fully applied since not all the costs related to regulation can be passed on to investors and will become a burden for the asset management industry.
 
“In this regard, the consolidation of the European fund industry might continue over the foreseeable future. Even a supportive market environment, with rising equity and bond markets, might not stop this trend. But it should at least slow down the consolidation, since increasing assets under management lead to higher income for fund promoters,” the report concludes.

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