Bad timing by investors switching their money added to losses in a disastrous year for European funds.
Missing opportunities by selling near the bottom or buying as prices were rising added to the financial woe of investors experiencing an awful year, says a research report from fund managers Morningstar.
Key findings from the survey showed:
- Fund outflows were €114 billion – €70 billion from equity funds and €44 billion out of fixed income
- Money market funds saw the strongest inflow in December, with €4.4 billion, but flows to short-term funds were in the red for the year
- Morningstar’s EUR money market short term and EUR money market were the least popular money market categories in 2011, with more than €44 billion in outflows
- Guaranteed funds were especially unpopular in December and throughout the year
- Europe’s largest and third largest fund companies, JP Morgan and BlackRock, maintained their rankings in 2011, thanks to money market business in Sterling and US dollars.
- Franklin Templeton looks like the big winner in Europe with growth of more than 14%
“The data is showing us just what a bad year it was for the European funds industry,” said Syl Flood, Product Manager, Asset Flows, at Morningstar.
“Macroeconomic uncertainty and market volatility clearly scared investors away from all kinds of funds, with outflows seen in equities, fixed income and money market funds. Even guaranteed funds, apparently designed to outperform in any market, weren’t popular.”
Flood warned against bad timing when switching investments to avoid extra costs.
“Only allocation funds saw net positive inflows. The wash of money out of funds in the face of a difficult year for asset markets is understandable, but investors often cost themselves by selling near the bottom or buying after an asset class has risen,” he said.
“They also incur transaction costs and taxes that might otherwise be avoided. Our analysts therefore routinely caution against attempts to time the market and advocate a focus on maintaining a diversified portfolio structured to meet long-term investment goals.”
