October 1, 2024 — Europe’s investors are bullish. Across Europe, companies that distribute investment funds expect the investors on their platforms to pour assets into a range of products spanning both equities and fixed income, and traditional and alternative products.
Approximately 40% of the European fund distributors participating in the Coalition Greenwich Voice of Client – 2024 European Intermediary Distributors Study expect to see large inflows into domestic/European equities in the next 12 months, and roughly 44% expect to see major inflows into international/global equities. Projections are even more bullish for small-cap stocks, where 47% of fund platforms expect to see significant inflows. In each of these asset classes, no more than 1 in 10 distributors expect to see significant outflows. Expectations are equally optimistic in fixed income.
“Uncertainty in interest rate policy in recent years has created a lot of volatility in fixed income portfolios, as investors tried to optimize their exposures,” says Christopher Dunn, Head of Investment Management – Europe at Coalition Greenwich and author of European Fund Distributors Project Strong Demand across All Asset Classes. “With central bankers in both Europe and the U.S. laying out a clearer roadmap for the future and now cutting rates, nearly half of European fund distributors are projecting significant inflows into investment-grade bonds in the coming year.”
Approximately 37% of European fund distributors predict significant inflows into private equity in the next year, and about a third (32%) expect large inflows into private debt, with 13% and 11% projecting outflows, respectively. Expectations are similar for commodities and infrastructure. In addition, fund distributors expect to see outflows from hedge funds and real estate.
ESG Loses Traction, but Sustainable Investing Marches On
European fund distributors expect to drop formal ESG requirements for managers on their platforms. About two-thirds of European fund distributors currently require managers on their platforms to have a clearly articulated ESG approach and a range of ESG-compliant products. Only 40% expect to have those requirements in place five years from now.
“We believe the retreat from formal ESG requirements reflects the fact that sustainability has been so tightly and broadly embraced by the investment industry in Europe that formal ESG requirements have become superfluous,” says Christopher Dunn. “European asset managers have integrated such criteria into their investment processes to the extent that these standards are now embedded in most investment products.”
European Fund Distributors Project Strong Demand Projected across All Asset Classes includes projected asset flows on fund distribution platforms from European private banks, retail banks, funds of funds, financial advisors/IFAs, and others, as well as data and analysis on the evolution of ESG and sustainable investing among retail investors in Europe, and on the criteria used by gatekeepers to select managers and individual fund products for their platforms.