With returns from European equities distinctly harder to come by than during the QE inspired climb last year, active funds falling short in active share terms are going to find investors less forgiving.
While European stocks were down some 5% in January, fund flows went the other way. European equities were the only asset class seeing net inflows over the month, apart from absolute return funds.
European investors are taking risk off the table after the recent market turmoil, the February reading of the State Street Investor Confidence Index (ICI) suggests. However, investor confidence in North America and especially Asia increased over the month.
Terry Smith, an global equity fund manager from the UK, has said he will vote to leave the EU on 23 June.
‘Extraordinary’ was how a number of commentators described the scenes in the House of Commons on Monday during the debate about whether or not Britain should remain in the European Union.
Belgian fund buyers, once Europe’s most upbeat, have turned negative on most asset classes, and they have been hoarding cash. European equities is the only long-only asset class holding out against the Belgian bearishness.
Neil Woodford, the UK equity star manager, has said he believes the United Kingdom’s economy would not be adversely impacted by leaving the European Union, with temporary currency weakness is the only real issue.
European equity ETFs saw record inflows in 2015, according to Morningstar data. However, it has now turned out ETF investors only joined the party once the happy hour was over. Investors who put their money into a MSCI Europe ETF a year ago are now having to cope with a loss of 12.4%.
There were many lessons to be learnt from the financial crisis in the latter part of 2008 and we have been given a timely reminder of one of the biggest.
Between 5 and 15% of active Ucits equity funds could be index huggers, the European financial services regulator Esma has concluded after it analysed the performance of a set of 2600 of such funds compared to their benchmarks, for the period 2012-2014. This is strong enough evidence for the regulator to take further action, said Esma’s chair Steven Maijoor.