total fund assets up 12.3% in 2003 while dip in new launches suggests period of consolidation
A slowdown in launches in a period during which total fund assets increased suggests Europe may have moved into a period of investment fund consolidation, according to Fefsi.
Data from the association for the European investment management industry's 2004 Fact Book shows slowing Ucits fund creation over the last few years culminated in an actual decline in absolute terms in 2003.
In spite of this, however, the European fund industry, including Ucits funds, turned a corner in 2003 with a 12.3% increase in total assets under management.
After a 6.9% decline posted in 2002, this recovery pushed fund assets to an all-time peak at e4,747bn.
Bond, money market and real estate funds attracted most of the new investment in the first half of 2003 with equity funds handed the baton during the second half following the stock market recovery after the end of the Iraq war. Total assets in the Ucits market grew by 12.8% (e232bn) in 2003, reversing a decline of 7% in 2002. The Ucits asset growth can be broken down into an 8% asset increase fuelled by net inflows and a 5% increase attributable to market appreciation.
Equity and balanced funds realised more growth from market appreciation, whereas growth in fixed income assets was mostly driven by net inflows.
UK fund industry net assets were £241.1bn in 2003, up from £194.5bn in 2002. The number of Ucits funds in the UK declined from 1,874 in 2002 to 1,833 in 2003.
In 2003, Ucits assets by fund type were split as follows: equity 73.9%, bond 16.7%, and balanced 9%. Within this, the asset mix remains dominated by UK equities, accounting for 42%, or £100.5bn, of total funds under management in December 2003.
In the UK, Ucits net sales of bond funds, at £6.107bn, outstripped those of equity funds, at £2.872bn in 2003. In 2002, £2.898bn of equity funds were sold compared to £4.223bn of bond funds. Net sales of balanced funds in 2003 were £891m compared to outflows of £31m in 2002.
In the UK, global equity funds continue to be the dominant category for new investment, with the largest annual growth rates occurring in the global emerging markets and European smaller companies sectors.
Gross annual sales to end 2003 of global equities amounted to £15.4bn, or 32.8% of total sales. UK smaller companies funds accounted for £1.1bn in sales, up 11% on the previous period.
Fund sales to UK retail investors continue to be distributed predominantly via the intermediary channel, with 65% of funds in the 2003 bought via advisers, a 1% decrease on the previous period. The second most popular channel was the salesforce/tied agents with 21% of sales, followed by the direct channel with 9%.
Isa distribution shows a different pattern however, with salesforce/tied agents garnering half of sales, intermediaries 27% and direct 22%. At the end of December there were 72 Oeic providers in the UK offering 1,074 sub-funds.
The top three providers by assets under management of home domiciled funds were Fidelity (£22.06bn), Threadneedle (£12.36bn) and Scottish Widows (£12.04bn).
Fefsi's survey covered 22 countries.