European asset managers have garnered inflows of $54bn so far in 2023, marking a reversal from 2022, which saw the worst year for outflows since the Global Financial Crisis.
According to a report by the Bank of America Global Research, risk appetite has risen as markets rally on the back of more robust economic growth, lower inflation figures and slower rate rises.
However, weekly flow momentum has faded as equities reach year-to-date highs, the report found. BofA's European equity strategists saw downside risks and forecasted that the economy is about to experience a meaningful headwind from monetary tightening.
Coinciding with a slowdown in rate hikes by the central banks, fixed income has seen the largest inflows this year at $32bn. All bond categories have had inflows year-to date, led by investment grade as yield has become more attractive.
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Equities have also attracted inflows so far this year, at $28bn. EM and Global equities are up so far this year, but all other equity strategies are in outflow year-to-date, with the most in European equities.
Looking to the most popular products, the largest inflows were recorded in Emerging Asia, as a result of China's reopening and EM optimism, with Chinese stocks ranking as the third best-selling asset class.
Demand for European corporate bonds is likewise high, which is consistent with the sector data for investment grade. In addition to Asia, China, and EM, global ESG themes like sustainable growth and the energy transition are also garnering significant inflows.
When it comes to the laggards, the largest withdrawals year-to-date have been from alternative risk premia, followed by European stocks, while high yield has also performed poorly.
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The positive inflow figures in 2023 comes on the back of one of the worst years for European asset management flows since the Global Financial Crisis, with total net outflows of $320bn. The last time the industry had had net outflows was in 2011.
"After significant outflows in 2022, we expect a rebound in 2023. But we expect organic growth to be below its long-term average of 3-4% given rate and recessionary pressures," the BofA analysts wrote.
The firms with the most equity outflows in 2022 were Allianz, Baillie Gifford, Sjunde AP-fonden, Morgan Stanley and T Rowe Price, while BlackRock, Vanguard, Deka, Mediolanum and Zuercher Kantonalbank saw the most inflows.
PIMCO, Nordea, Schroders, UBS and AllianceBernstein were the firms with the most outflows in fixed income last year, while the top bond gatherers included BlackRock, CaixaBank, Vanguard, Zuercher Kantonalbank and BBVA.
