Outflows from UCITS on a par with 2008, says EFAMA

Outflows from UCITS were at the same level at the height of recent pandemic volatility in March as they were during the global financial crisis in October 2008, according to a report published by European Fund and Asset Management Association EFAMA. 

In the first Market Insights report, along with an Investment Fund Industry Fact Sheet for March 2020, EFAMA revealed that net outflows from UCITS in March totalled EUR313 billion, or 2.9 per cent of net assets.

“In absolute terms, these net outflows were the largest net monthly withdrawals ever observed. However, as a percentage of net assets, they were at the same level as in October 2008, at the height of the Global Financial Crisis – a consequence of the increase of the AuM since the GFC,” reads the report.

Despite the sharpest market downturn in modern history, EFAMA notes that the vast majority of UCITS were able to function normally, with only around 80 out of more than 34,000 UCITS having to suspend trading for a limited period of time. This was primarily due to difficulties in providing reliable valuations of their portfolio assets.

This resilience can be explained by a number of factors, in particular the existence of a strong UCITS liquidity risk management framework. 

With an unpredictable next quarter – and year – EFAMA welcomes the acceleration in the adoption of certain liquidity management tools in a number of Member States, as these tools increase the ability of European fund managers to effectively manage redemptions and liquidity risk in the future. 

Tanguy van de Werve, director-general of EFAMA, comments: "Despite sizeable outflows in March, by and large, investors were able to redeem their money on a daily basis. This demonstrates the effectiveness of the current regulatory framework for EU domiciled funds, especially as it relates to liquidity risk management.”

EFAMA also analysed developments in bond, equity, and money market funds in the report.

Bond funds recorded the largest net outflows, at EUR150 billion, as the bond market’s stress coincided with increased perceptions of risk and higher demand for cash.

Meanwhile, equity funds and multi-asset funds suffered moderate net outflows of EUR60 billion and EUR44 billion, respectively,  suggesting that many investors avoided taking money out of these funds at low valuations.  

Money market funds recorded relatively strong net outflows (EUR43 billion), which EFAMA suggests was down to large institutional investors building liquidity buffers and large corporate investors facing quarter-end disbursements.