European and US equity funds see record outflows as global bear market continues

Europe-focused active equity funds last week saw their highest outflows of 2023, following 14 consecutive weeks of declining volumes, while US equity funds shed US$27bn last month and passive funds remain one of the few bright spots.  

Europe-focused equity funds recorded their 14th consecutive weekly outflow of US$2.45bn last week (the second-largest over the past seven weeks), although around 20% of funds saw net inflows.  

Active funds suffered the most, with outflows of US$2.1bn – the largest weekly outflow so far this year. Passive funds saw outflows of US$0.35bn.  

Europe-focused funds have seen US$22.1bn of net outflows year-to-date: including US$32bn of outflows from active funds and US$9.5bn of inflows into passive funds.  

Size stocks (US$0.5bn) recorded the largest inflows last week, while Financials (US$0.6bn), the UK (US$0.42bn) and Growth stocks (US$0.2bn) posted the largest outflows, according to BofA Securities quant strategist Paulina Strzelinska. Notably, no specific sector or country recorded inflows last week. 

It’s a notable change from the start of the year, when Europe-domiciled long-term equity funds took in EUR25.3bn in inflows for January 2023, their highest since January 2022, split fairly evenly between active and passive (according to Morningstar data), with global large-cap blend equity and global emerging markets equity funds the best sellers.  

The data underlines the ongoing bear market for equities globally, which has seen a grim first half of the year as economic conditions continue to squeeze investor sentiment. And it’s no better on the other side of the pond. According to the latest figures from the US-based Investment Company Institute (ICI) as of 21 June, last week saw estimated outflows of US$8.64bn from US equity funds, compared to US$15.73bn the week previously. The US was the biggest loser, with outflows of US$6.96bn for domestic equity funds, compared to US$1.68bn for world equity funds.  

Last month, US equity funds bled about US$27bn in total – their seventh consecutive month of outflows, according to Morningstar data. Large-value funds suffered a US$15bn outflow in May – their largest ever on an absolute basis, and equivalent to their worst monthly organic growth rate since March 2009. Notably, Vanguard led the losses, with a US$10bn outflow from its funds last month.  

“For the year to date, US funds have shed nearly $1 billion, a rarity this far into a calendar year,” said Adam Sabban and Ryan Jackson of Morningstar Research in their latest note. “Aside from passive large-blend funds, few niches within the group have seen much interest.”

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