In the first seven months of 2015, multi-asset funds saw a record amount of inflows. Spanish investors poured in a net €26bn, on top of the €22bn in net new money that was invested in 2014. However, most of this new money came from maturing bank deposits that were owned by investors who made their first forays into the investment market, says Alvaro Martín Sauto, head of funds-of-funds and absolute return at Bankia, Spain’s fourth-largest bank by assets.
So when it turned out their new investments could actually make them lose money, some of these investors got scared. “When they came into the market in 2015, they almost immediately experienced a lot of volatility such as the turmoil around China in August 2015 and then the market correction in January,” Martín Sauto explains. As a consequence, multi-asset fund flows in Spain have seen a U-turn, with investors finding their way back to deposits and short-duration bond funds, which actually had seen strong outflows in the course of 2015.
The Italian exception
Appetite for multi-asset funds has cooled down markedly across Europe in 2016, with just €8.1bn in net inflows across Europe during the first seven months of the year, compared to more than €110bn in the same period in 2015.
And the bulk of this year’s inflows has come from Italian investors, who strangely haven’t seemed to have lost their love for multi-asset funds at all, even though they are known to be just as conservative as their Spanish counterparts. They poured in a net €7.8bn into the category during the first half of 2016, which is even slightly more than during the same period in 2015. German investors, the other big multi-asset lovers in Europe, also have continued to commit new money to multi-asset funds, though at a much lower pace than in 2015.
So it looks like Spanish investors have made an unusually strong swing from exuberant bullishness to bearishness compared to their counterparts elsewhere in Europe, even though it must be noted that they have only sold off a small proportion of the money they committed last year.
But they will sooner rather than later make a comeback to the multi-asset space, believes Martín Sauto. “The past year has been good for our clients to learn how markets can evolve. And they have learnt this without experiencing similar losses as in 2008,” he says. “And in six months, they are going to realise their bank deposits yield only 0.2% so they will come back into the market. They will have to accept some volatility to make a return.”
Read more about Alvaro Martín Sauto’s quest to get his clients to accept more volatility in the October issue of the Expert Investor magazine, out soon.
