Assets under management (AuM) in Europe-domiciled funds increased by 8% during the first half of this year due to buoyant markets, according to a report by financial services firm Moody’s.
As AuM climbed to €9.9 trillion, overall flows remained subdued with only seven fund managers reporting a net increase, while 13 suffered outflows.
In the six months to the end of June, total net inflows reached €11 billion, a marked improvement from the €52 billion of redemptions in the second half of last year.
Although the sector’s profitability remained resilient due to tight cost controls offsetting ongoing outflows from high margin products, revenues drifted lower.
Revenues for the firms surveyed by Moody’s fell 3% relative to the previous half and were down 9% year-on-year.
“The decline reflected competitive pressure on fees and the substitution of high margin equity funds for lower margin fixed income products. These factors outweighed the positive impact of rising market valuations,” said Marina Cremonese, a senior analyst at the firm.
The analytics firm’s global outlook for the funds industry remained stable, however. The primary reasons for this outlook are the manageable debt burdens and resilient profit margins of the firms rated.
“Asset managers are adapting to secular challenges within the industry by creating new active products that are differentiated from broad benchmarks, by shifting from a product model to a service model, by increasing their use of technology to create better and deeper connections with distributors and end-customers, and by keeping operating costs under tighter control,” Cremonese said.
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