Selling European equities and buying global emerging market stocks is developing into the great trend of 2016.
Unilever shares slid this morning as news of a fall-out over price increases with one of its biggest customers spread.
Emerging markets saw strong net inflows in August and September while outflows from European equity funds continue relentlessly.
Lyxor Asset Management has found that close to half of European- domiciled active funds outperformed their benchmarks last year, a big increase on 2014.
The European Securities and Markets Authority (Esma) considers market and credit risk in Europe’s equity and bond markets ‘very high’, it said in its latest risk outlook. It noted Brexit may increase risks further along the line.
The UK equity star manager Neil Woodford has thrown down the gauntlet to the fund management industry by scrapping bonuses at his self-titled firm.
European equity funds experienced their largest ever monthly net outflows in July, beating the previous record set in January 2008, according to Morningstar fund flows data.
Barcelona’s fund buyers had been bullish about European equities almost by default for the past four years. But political instability across Europe has dented their appetite. Global emerging market equities are their new darling.
In the first half of 2016, investors in Europe have poured in $5.7bn (€5.1bn) into smart beta funds as market capitalisation index trackers saw outflows over the period, according to Morningstar data analysed by ETF provider WisdomTree Europe. Brexit could be one of the reasons for the switch.
Asset managers have been too optimistic in their return forecasts for European and Japanese equities over the past 18 months or so. Despite having faced disappointing returns over the past year or so, they are not yet prepared to meaningfully lower their expectations.