Investors have redeemed 250 Billion European funds making this the fastest rate funds have been pulled on record as uncertainty over the impact of coronavirus looms.
Redemptions last month is more than double what transpired during the last global crisis, when investors pulled €108bn from long-term funds in October 2008, according to Morningstar, the data provider.
Europe’s fund industry was hit by falling markets that led to a €1tn drop for long-term funds. Overall, assets fell from €9.5tn at the end of February to €8.2tn at the end of March, according to Morningstar. Also, Assets tumbled from €10.8tn to €9.5tn over the same period when including money market funds.
How did the Pandemic cause a record-breaking bull run?
The impact of COVID19 has caused a slump in fee revenues of more than €11bn following market falls and client outflows.
“While investors reacted to the spread of coronavirus with a certain sluggishness in February 2020, Covid-19 wrought havoc in Europe’s fund market in March,” said Ali Masarwah, director of Emea editorial research for Morningstar.
The redemptions came as markets across the world plummeted in response to the Covid-19 pandemic, leaving asset managers struggling to navigate the end of a record-breaking bull run.
Pimco had the highest redemptions in Europe
Pimco, the US bond fund giant, had the highest redemptions in Europe, with investors withdrawing €23.7bn, chiefly from its flagship Pimco Income fund. It also marked the largest one-month period of redemptions for the US asset manager on record.
The fund manager had previously lost huge sums of money after the departure of former star fund manager Bill Gross. Pimco said its “defensive positioning and liquidity management enabled [it] to navigate unprecedented market volatility in March that impacted virtually every segment of the asset management industry”.
Black Rocks outflow this week was over 1.7 Billion Euroes
Overall, bond funds across Europe were hit with redemptions of €140bn, almost three times the previous monthly record for outflows of €54bn in October 2008. BlackRock, the world’s largest asset manager, also suffered outflows across both its active and popular iShares exchange traded funds of more than €17bn, while UBS Asset Management and Vanguard had net sales of mutual funds.
Global large-cap blend funds bore the brunt of the latest redemptions followed by US large-cap blend and global emerging-markets equity funds.
Equity funds suffered outflows of €56bn in March, another record compared with the previous low in early 2008 when investors withdrew €46bn from equity funds domiciled in Europe.
Index funds were hit with outflows during the month and Long-term index funds shed €28bn in March, the highest outflows in a one-month period.
Vaultz Investors Take
Investor psychology also plays an important part in determining which way the market will go. Investors try to predict whether stocks will go up or down in value, and they very often follow what others are doing. That way they create a "herd" mentality, which can drive stock prices up or down, even against economic indicators.