Net assets of Ucits and alternative investment funds doubled over the last decade, reaching €20.7 trillion in 2023, a record-breaking year for ETFs, according to the European Fund and Asset Management Association (Efama).
The analysis by Efama, the representative association for the European investment management industry, noted the growing significance of large funds in the Ucits market. In 2023, Ucits funds smaller than €100 million represented less than 4% of the total net assets, while the share of funds with more than €1 billion in net assets increased. This shift highlights the concentration of assets in larger funds.
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Additionally, the cost of long-term Ucits has also been on a decline. From 2019 to 2023, the average cost of active long-term Ucits dropped from 1.16% to 1.06%, and the cost of passive long-term Ucits fell from 0.23% to 0.21%. This trend is expected to continue due to increased transparency in fund fees and intensified competition among asset managers.
Another finding was that passive Ucits have continued to gain market share, rising from 11% in 2013 to 26% by the end of 2023. The lower costs associated with passive funds and the growing demand for ETFs are driving this trend. Additionally, foreign investors have become significant buyers of EU investment funds, purchasing an average of €276 billion annually over the past five years.
Additionally, the share of US stocks in equity Ucits has doubled from 22% to 44% over the past decade, reflecting the strong performance of US stock markets, particularly large technology stocks.
In 2023, Ucits ETFs had a record-breaking year, attracting €169 billion in net sales, while non-ETF long-term Ucits experienced net outflows of €155 billion. Sales of sustainable funds slowed, with net sales of SFDR Article 9 funds declining, whereas Article 6 funds saw net inflows of €41 billion, driven by the popularity of ETFs.
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Overall, the average annual performance of all major Ucits types was positive, with equity Ucits delivering 14.2%, multi-asset Ucits yielding 8.7%, bond Ucits 5.7%, and money market funds 3.3%. Given the EU inflation rate of 3.4% in 2023, most Ucits proved to be excellent investment choices. Additionally, EU retail investors continued to buy funds, with a notable shift towards bonds, as national governments offered higher-yielding bond issuances to attract savers.
Tanguy van de Werve, director general, Efama, commented: “Ucits are delivering good returns with costs declining, attracting both European and foreign investors. While this is good news for the financial wellbeing of those investors, there are still far too many European households not reaping the benefits of investing in capital markets. This is a pivotal year of change within the EU institutions, with clear recognition from policymakers that we need to encourage more retail investing to address the pension gap and support economic growth. To achieve that, we need decisive actions that simplify investing, cut red tape, and move us closer to a Savings and Investments Union.”
