European Fund Industry
Review: 2023
Author:
Detlef GlowHead of Lipper EMEA Research, LSEG

This report analyses the assets under management and the fund flows in the European Fund industry over the courseof the year 2023 in an attempt to identify underlying trends and developments.

European Fund Industry Review: 2023

Executive Summary➢ The promoters of mutual funds (+€40.5 bn) and the promoters of ETFs(+€154.9 bn) enjoyed inflows over the course of 2023.

➢ The inflows into ETFs for 2023 were the second highest inflows for ETFs in
Europe in history.

➢ Long-term products enjoyed overall inflows over the course of 2023 (+€22.7
bn).

➢ Actively managed long-term products (-€173.5 bn) faced massive outflows
for the year 2023.

➢ Mixed-assets funds (-€100.3 bn) posted the highest estimated outflows onrecord for 2023.

➢ Money market products enjoyed the highest estimated net inflows (+€172.6bn) for 2023.

➢ Money Market EUR was the best-selling Lipper Classification for the year
2023 (+€107.7 bn).

➢ BlackRock was the best-selling fund promoter in Europe for the year 2023(+€107.8 bn).

➢ The overall number of funds in the Europe increased by 341 products.

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European Fund Industry Review: 2023

Contents
Executive Summary ......................................................................................................................................................................2
Contents ........................................................................................................................................................................................3
European Fund Industry Review, 2023 .......................................................................................................................................4
Assets Under Management in the European Fund Industry .....................................................................................................5
Assets Under Management by Product Type ..............................................................................................................................6
Assets Under Management by Asset Type .................................................................................................................................7
Assets Under Management – The Largest 20 Lipper Global Classifications ...............................................................................8
Assets Under Management – The Largest 20 Fund Promoters ..................................................................................................9European Fund Flow Trends 2023 ............................................................................................................................................ 10
Fund Flows by Product Types ................................................................................................................................................... 11
Fund Flows Active vs Passive Products .................................................................................................................................... 13
Asset Type Flows ...................................................................................................................................................................... 15
Flow Trends in Mixed-Assets Funds ......................................................................................................................................... 17
Mixed-Assets Fund Flows by Product Type .............................................................................................................................. 19
Mixed-Assets Fund Flows by Lipper Global Classification ........................................................................................................ 20
Mixed-Assets Fund Flows by Promoter ..................................................................................................................................... 21
Flow Trends in Money Market Funds ........................................................................................................................................ 22
Money Market Fund Flows by Lipper Global Classification ....................................................................................................... 23
Money Market Fund Flows by Promoter.................................................................................................................................... 24
Fund Flows by Lipper Global Classifications, 2023 ................................................................................................................... 25
Equity Japan – A Rally Without Investors?................................................................................................................................ 26
Fund Flows by Promoters, 2023 ............................................................................................................................................... 28
Promoter Activity ........................................................................................................................................................................ 29
Fund Launches, Liquidations, and Mergers .............................................................................................................................. 29

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European Fund Industry Review: 2023

European Fund Industry Review, 2023
It’s fair to say that 2023 was a challenging year for portfolio managers around the globe since the markets were
driven by a number of different factors and unpredictable incidents. Each of these could have caused a major market
downturn on their own. First of all, there were a lot of geopolitical tensions around the globe beside the still ongoing
war in Ukraine, which showed that democratic states might be more vulnerable than one may think. The concerns ofinvestors, especially in Europe, increased toward the end of 2023 since the actions taken by the Houthi rebels in the
Red Sea have the power to disrupt the still vulnerable delivery chains in Europe and other parts of the world.
Also, there were economic factors which burdened the expectations of investors, such as China’s failure to meet thegrowth expectations of investors when its economy was reopened after the end of the country’s zero-COVID strategy.
Talking about China, the credit crisis in the Chinese real estate sector later in the year was another factor that could
have caused a market downturn if it wasn’t handled well by the Chinese government. Nevertheless, investors are still
cautious about investments in China.
After the meltdown in the bond segment during the interest hiking cycle over the course of 2022, investors hoped thatthe measures taken by central banks would bring down inflation and lead to falling interest rates. This assumption
went against the hawkish statements of central banks around the globe for the first 10 months of 2023. The relatively
high interest rates raised fears that some major economies such as the U.S. would face a hard landing. In addition tothis, some investors might have recalled bad memories when the Silicon Valley Bank and two other regional banks
were closed in early March 2023. These feelings might have become worse when Credit Suisse struggled later in themonth and was finally taken over by UBS by governmental order.
Nevertheless, investors hope that central banks—especially the U.S. Federal Reserve—have reached the last phaseof their fight against high and further increasing inflation rates given their rather dovish statements during/after therespective central bank meetings in December. With regard to this, some investors already expected that there might
be room for decreasing interest rates early next year, which might be reflected by the estimated inflows in bond ETFs.
Despite the dovish statements by the central banks, these estimates might be under scrutiny since inflation in the
major economies seems to be more sticky than expected and central banks are held responsible to reach theirinflation targets. This could mean that the expected rate cuts start later than investors expect.
In addition, there were some concerns about the possibility of a recession in the U.S. and other major economies
around the globe. These fears have been raised by long-term inverted yield curves, which are seen as an early
indicator for a possible recession. The normalization of the inverted yield curves might be another short-term
challenge for the bond markets.
On the other hand, the spectacular performance of the so-called Magnificent Seven (Alphabet, Amazon, Apple, Meta,
Microsoft, Nvidia, and Tesla) drove the U.S. markets up. The stellar performance of these stocks might havereminded some investors of the performance of some stocks before the burst of the so-called “dot.com bubble.” As aresult, many investors might have been caught between fear and greed when looking at the U.S. equity markets.
That said, some major equity indices reach new all-time high values at the end of year 2023 despite all the
headwinds over the course of the year.
With regard to the above, it is no surprise that the year 2023 was a challenging year for the European fund industry.
The promoters of mutual funds (-€33.0 bn) faced outflows for the year, while the promoters of ETFs in Europe(+€154.9 bn) enjoyed inflows over the course of the year. The outflows for actively managed funds were driven by
mixed-assets and alternatives products, while money market and bond products were the main drivers for the inflows
in actively managed products.
Within the current market environment, it is not surprising that European investors bought further into money market
products since the Eurozone and other major economies have an inverted yield curve. This means that money
market products offer a higher yield than medium or long-term bonds. More generally, long-term funds (+€22.7 bn)
and money market products (+€172.6 bn) enjoyed inflows for the year. These flow numbers might indicate that
European investors are further readjusting their portfolios to the current market environment.

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European Fund Industry Review: 2023

Assets Under Management in theEuropean Fund Industry
Within an environment in which bond markets stabilized after the massive drawdowns of 2022 and equity markets
were moving in the directions of new all-time highs, it is no surprise that assets under management in the European
fund industry increased.
In more detail, the assets under management in the European fund industry increased from €13,313.1 bn as ofDecember 31, 2022, to €14,371.1 bn at the end of December 2023.

Graph 1: Assets Under Management in the European Fund Industry, January 1, 2003 - December 31, 2023

Source: LSEG Lipper

The increase in assets under management of €1,058.0 bn was mainly driven by the performance of the underlying markets(+€862.3 bn), while estimated net sales contributed +€195.4 bn to the overall growth.

5European Fund Industry Review: 2023

Assets Under Management by Product TypeThe majority of assets under management in the European fund industry were held by actively managed mutual
funds (€11,169.6 bn), followed by index tracking mutual funds (€1,638.0 bn) and exchange traded funds (ETFs)(€1,563.5 bn). It is noteworthy that the assets under management in ETFs reached a new all-time high at the end of2023.

The gap in assets under management between index tracking mutual funds and ETFs further decreased over thecourse of 2023 since ETFs witnessed much higher inflows (+€154.9 bn over the course of the year than index
tracking mutual funds (+€52.8 bn).

Graph 2: Market Share, Assets Under Management in the European Fund Industry by Product Type,
December 31, 2023

Source: LSEG Lipper

The preference of European investors for ETFs compared to index tracking mutual funds started to become obvious
in 2021. Please see graph 10 on page 14 for more details and possible reasons for this trend.

6European Fund Industry Review: 2023

Assets Under Management by Asset TypeIn more detail, equity products (€6,043.8 bn) held the largest amount of assets, followed by bond products (€3,358.7bn), mixed-assets products (€2,509.2 bn), money market products (€1792.4 bn), alternatives products (€338.1 bn),real estate products (€251.5 bn), “other” products (€24.7 bn), and commodities products (€52.9 bn).

Graph 3: Market Share, Assets Under Management in the European Fund Industry by Asset Type, December
31, 2023

Source: LSEG Lipper

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European Fund Industry Review: 2023

Assets Under Management – The Largest 20 Lipper Global Classifications
Equity Global (€1,635.1 bn) was the largest Lipper Global Classification in the European fund industry at the end of
December 2023, followed by Equity U.S. (€774.4 bn), Money Market EUR (€757.5 bn), Money Market USD (€620.9bn), and Mixed Asset EUR Balanced – Global (€399.7 bn).

Graph 4: The 20 Largest Lipper Global Classifications in the European Fund Industry by Assets Under
Management, December 31, 2023

Source: LSEG Lipper

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European Fund Industry Review: 2023

Assets Under Management – The Largest 20 Fund Promoters
BlackRock (€1,496.3 bn) is by far the largest fund promoter in Europe. The market leader is followed by Amundi(€566.7 bn), JPMorgan (€401.8 bn), DWS Group (€401.8 bn), and UBS (€396.0 bn).
Since BlackRock held more assets under management that the following three fund promoters combined at the endof 2023, there is no competition for the leading position in Europe. But given the, in some cases, narrow margins
between the different asset managers on the table of the largest fund promoters in Europe, there is a healthy
competition between the other fund promoters.

Graph 5: The 20 Largest Fund Promoter in the European Fund Industry by Assets Under Management,
December 31, 2023

Source: LSEG Lipper

9European Fund Industry Review: 2023

European Fund Flow Trends 2023
After facing estimated overall net outflows of €164.2 bn for the year 2022, the European fund industry enjoyed inflowsof €195.4 bn over the course of 2023.

Graph 6: Estimated Annual Fund Flows, January 2004 - December 2023 (Euro Billions)

Source: LSEG Lipper

Even as the overall flow pattern for 2023 looks healthy for European fund industry overall, the underlying fund flow
data show trends which may become a concern for some fund promoters or market segments.

10European Fund Industry Review: 2023

Fund Flows by Product Types
The first fund flow trend becomes visible when we split up the overall fund flows by product type. While actively
managed mutual funds (-€12.4 bn) faced estimated net outflows, index tracking mutual funds (+€52.8 bn) and ETFs(-€154.9 bn) enjoyed estimated inflows over the course of 2023.
Graph 7: Estimated Net Flows by Management Approach and Product Type (January 1 – December 31, 2023)

Source: LSEG Lipper

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European Fund Industry Review: 2023

As graph 8 shows, the inflows into ETFs within the unstable market environment of the year 2023 repeat a trend wewitnessed also over other rough market periods such as the financial crisis, the euro crisis, or the market turmoil
during the fourth quarter of 2018 where ETFs enjoyed inflows while actively managed mutual funds faced massive
outflows.

Graph 8: Estimated Annual Fund Flows by Product Type, January 2004 - December 2023 (Euro Billions)

Source: LSEG Lipper

The outflows of €12.4 bn from actively managed funds over the course of 2023 may look somewhat moderate at firstglance. But since these numbers do include money market products, the picture may change if the flows get split up
between long-term products and money market products.

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European Fund Industry Review: 2023

Fund Flows Active vs Passive Products
The trend toward passive investment vehicles is widely discussed by market observers and asset managers, so it isworthwhile to highlight this topic. Taking into account that long-term products such as bond, equity, mixed-assets
funds, etc., are much more profitable for the fund promoters than money market products, 2023 might be considered
as a bad year for active fund managers as actively managed long-term mutual funds faced outflows (-€173.5 bn).

Graph 9: Estimated Net Flows by Management Approach and Product Type (January 1 – December 31, 2023)

Source: LSEG Lipper

In more detail, ETFs have witnessed inflows of €154.9 bn over the course of 2023. These flows marked the second
highest inflows into ETFs in history and fell only shy of the record inflows of the year 2021 (+€161.4 bn). Therefore,
2023 will be considered as a very good year for the European ETF industry.
Conversely, actively managed long-term mutual funds faced outflows (-€173.5 bn). That said, the inflows into money
market products (+€161.2 bn) brought the overall outflows from actively managed funds down (-€12.4 bn).
Some market observers may speculate that European investors are selling actively managed products and buying
back passive products, especially for classifications with roughly matching numbers for the outflows from actively
managed funds and the inflows into ETFs. Generally speaking, one could agree with this thesis by looking at thehigh-level numbers, but since this can’t be proven by facts, I would not totally agree with this assumption.
In addition, one needs to bear in mind that the flows in money market products are impacted by a combination ofasset allocation decisions of portfolio managers and corporate actions such as cash dividends or cash payments
since money market funds are also used by corporations as replacements for cash accounts.
Given the inverted yield curves, it can be assumed that a number of investors use money market products as areplacement for cash accounts since money market products offer a comparably high yield within the current interest
rate environment. Therefore, it can be expected that the inflows in money market products may revert once the yield
curves have been normalized. Please read the money market products section (page 22 ff.) for more details on theunderlying trends in the money market segment.

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European Fund Industry Review: 2023

The flows into ETFs (+€154.9 bn) over the course of 2023 were outpacing the flows into passive index mutual funds(+€52.8 bn) by a large margin. This means European investors preferred ETFs over index tracking mutual funds forthe third consecutive year.
On one hand, this trend might be caused by the market environment over the last three years, but given the fact thatindex tracking mutual funds and ETFs had similar inflows when investors faced the outbreak of the COVID-19
pandemic over the course of the year 2020, there must be additional reasons for this trend.

Graph 10: Estimated Annual Fund Flows in ETFs and Index Tracking Mutual Funds, January 2004 - December
2023 (Euro Billions)

Source: LSEG Lipper

From my point of view, one of the additional reasons for the higher flows in ETFs compared to index tracking mutual
funds is the retail adoption of ETFs, a trend which took off when retail investors started to launch ETF saving plans
with neobrokerage platforms during the COVID-19 pandemic. These platforms were, especially in Germany, very
successful in winning new clients with their easy to access apps. These apps enable retail investors to instantly buy
or sell ETFs within their portfolios and offer, in Germany, free-of-charge ETF saving plans.
In addition, an increasing number of funds of funds are using ETFs for various reasons. One reason that sticks out isthe fact that funds of funds are using ETFs to bring their total expense ratios (TER) down. This is especially true forfunds of funds which are used in unit-linked insurance products, since the TER is contributing to the overall costs of
the insurance contract, which must be disclosed to customers. This means a lower TER may lead to overall lower
costs for the customer, which can be a competitive advantage for the respective insurance company.

14European Fund Industry Review: 2023

Asset Type Flows
Mutual funds (active and index tracker) (+€40.5 bn) and ETFs enjoyed inflows of €154.9 bn over the course of theyear 2023. The inflows into ETFs within the still somewhat uncertain market environment repeat a trend we saw overother periods with uncertain or rough market conditions. These periods include the financial crisis, the euro crisis, andthe second half of 2018—where ETFs enjoyed inflows while mutual funds faced massive outflows. Nevertheless, thisflow pattern is unusual in a market environment with equity and bond indices trending upward.
With regards to the inverted yield curves for the Eurozone and other major economies in the world, it is no surprisethat European investors favored money market products over the course of the year. In addition, the strong inflows
into bond products might be seen as a sign that European investors may anticipate the ending of the interest hiking
cycle of central banks around the globe, led by the U.S. Federal Reserve.
Overall, long-term investment products (+€22.7 bn) and money market funds (+€172.6 bn) enjoyed inflows for theyear.
Taking a closer look, money market funds (+€172.6 bn) were the asset type with the highest estimated net inflows
overall for 2023. It is followed by bond funds (+€157.7 bn). On the other hand, “other” funds (-€0.5 bn), commodities
funds (-€2.3 bn), real estate funds (-€3.8 bn), equity funds (-€10.8 bn), alternatives funds (-€17.3 bn), and mixedassets funds (-€100.3 bn) faced outflows for the year.

Graph 11: Estimated Net Sales by Asset and Product Type, January 1 – December 31, 2023 (Euro Billions)

Source: LSEG Lipper.

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European Fund Industry Review: 2023

A more detailed view of the fund flows in Europe shows that the flow pattern for ETFs was somewhat different
compared to the flow pattern for mutual funds. One reason for this can be seen in the low usage of ETFs forinvestments in money market and mixed-assets funds. As a result, ETFs do play only a minor role for the best- andworst-selling asset type.
The vast majority of the flows in money market (+€172.6 bn) came from mutual funds (+€162.3 bn), while ETFs
contributed (+€10.3 bn) to the overall flows. The same is true with regard to the estimated net inflows overall for bondfunds (+€157.7 bn), where mutual funds enjoyed inflows of €104.1 bn, while ETFs gathered €53.6 bn.
Since there are no ETFs for the asset types “other” (-€0.5 bn) and real estate (-€3.8 bn), all flows in these asset types
are from mutual funds. The outflows from commodities funds (-€2.3 bn) were mainly driven by mutual funds (-€1.7bn), while ETFs accounted for outflows of €0.7 bn.
The most interesting flow pattern can be observed for equity funds (-€10.8 bn) since ETFs enjoyed inflows of €92.3
bn, while mutual funds faced outflows (-€103.0 bn).
The majority of the outflows from alternatives (-€17.3 bn) can be attributed to mutual funds (-€16.1 bn), while ETFs
posted outflows of (-€1.2 bn).
Since mixed-assets funds (-€100.3 bn) are seen as a natural habitat for active managers, it is no surprise that ETFs
play only a minor role for the flows in this segment. Given the overall flow pattern, it is also not surprising that mutual
funds (-€100.9 bn) faced outflows for the year, while ETFs (+€0.6 bn) enjoyed shy inflows.

Graph 12: Estimated Net Sales by Asset and Product Type, January 1 – December 31, 2023 (Euro Billions)

Source: LSEG Lipper

Since the outflows from mixed-assets funds were the highest outflows from these products on record, it is worthwhile
to analyse these flows in more detail. The same is true for the flows in the money market segment since the overallmoney market flows are driven by different trends.

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European Fund Industry Review: 2023

Flow Trends in Mixed-Assets Funds
Since the outflows of €100.3 bn for the year 2023 marked the highest outflows from mixed-assets funds on record, it
is worthwhile to analyze the underlying trends in this segment of the European fund industry, as we may witness a
new era for mixed-assets funds.
Since ETFs play only a very minor role in the segment of mixed-assets funds, we won’t analyze the flows by producttype.

Graph 13: Estimated Annual Net Flows in Mixed-Assets Funds (Euro Billions)

Source: LSEG Lipper

Mixed-assets funds have been a focus of European investors since after the credit crisis in 2008. This was becausesome mixed-assets products were able to post positive returns during the market turmoil of the credit crisis, as wellas during the euro crisis in 2011. With the falling interest rates, an increasing number of investors started to look at
mixed-assets as replacements for their bond investments since the risk/return profile of some especially conservative
mixed-assets funds are somewhat similar to the risk/return profile of aggregate bond funds. With the increasing
interest rates over the course of 2022, and at the same time falling equity markets, the majority of mixed-assets funds
posted negative returns for the year. As a result, some investors were disappointed with the results of the mixedassets funds in their portfolio and sold the respective products.

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European Fund Industry Review: 2023

With increasing hope that central banks around the globe have reached the end of their interest rate hiking cycles,
investors began to reconsider bonds as an attractive asset type and started to buy back into bonds. Given the level ofinterest rates achieved, the attractiveness of (conservative) mixed-assets funds has declined sharply, leading tofurther sales.
With regard to this, it is not surprising that mixed-assets funds witnessed outflows in all months of 2023.

Graph 14: Estimated Monthly Net Flows in Mixed-Assets Funds (Euro Billions)

Source: LSEG Lipper

The changing market environment for bonds and the current fund flows trend may indicate that mixed-assets may
face a longer period with outflows.

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European Fund Industry Review: 2023

Mixed-Assets Fund Flows by Product Type
Since mixed-assets funds follow a variety of different investment objectives, Lipper classifies these funds in 71
different Lipper Global Classifications and five product types (absolute return, guaranteed, (plain vanilla) mixedassets, protected, and target maturity funds).
In line with expectations, (plain vanilla) mixed-assets funds are the most important product type and account for the
majority of the outflows (-€86.0 bn) from mixed-assets funds over the course of 2023. It was followed by absolute
return products (-€12.8 bn), target maturity products (-€1.0 bn), and protected products (-€0.7 bn). Guaranteed funds
were the only product type in the mixed-assets segment which posted inflows (+€0.3 bn) over the course of 2023.

Graph 15: Estimated Net Flows in Mixed-Assets Funds by Product Type – January 1 – December 31, 2023
(Euro Billions)

Source: LSEG Lipper

It is not surprising that guaranteed mixed-assets funds enjoyed inflows over the course of 2023 since guaranteed
products are mainly retail products which are used by advisors as one-stop products if their customers are looking forinvestments with a conservative or moderate risk profile. This is especially true when the respective fund promoter ofsuch products is linked to a captive distribution channel.

19European Fund Industry Review: 2023

Mixed-Assets Fund Flows by Lipper Global Classification
Contrary to the general fund flow trend Mixed Asset GBP Aggressive (+€18.7 bn), Mixed Asset USD Balanced – US(+€5.2 bn), Mixed Asset CHF Balanced (+€1.5 bn), Mixed Asset CHF Aggressive (+€1.2 bn), and Mixed Asset EUR
Aggressive – Global (+€0.7 bn) enjoyed inflows. At the other end of the spectrum, Mixed Asset EUR Conservative –Global (-€27.8 bn) suffered the highest net outflows in the mixed-assets segment, bettered by Mixed Asset EUR
Flexible – Global (-€24.4 bn), Mixed Asset EUR Balanced – Global (-€19.7 bn), Mixed Asset GBP Balanced (-€17.7bn), and Mixed Asset USD Flexible – Global (-€3.6 bn).

Graph 16: Estimated Net Flows in Most Important Mixed-Assets Classification – January 1 – December 31,
2023 (Euro Billions)

Source: LSEG Lipper

The strong inflows in Mixed Asset GBP Aggressive are somewhat surprising given the overall fund flow trend in mixed-assets
funds. That said, it looks like U.K. investors had shifted money from Mixed Asset GBP Balanced into Mixed Asset GBP
Aggressive. Unfortunately, such an assumption can’t be proven by fund flows data, but since some institutional investors—
especially in the pensions segment—may had a higher free risk budget when the U.K. bond market normalized after the LDI
crisis in Q4 2022, this assumption seems to be reasonable. As for this, one may conclude that these flows are rather driven by aspecific market event than the overall market environment and fund flow trends.

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European Fund Industry Review: 2023

Mixed-Assets Fund Flows by Promoter
According to the Lipper database there were 277 fund promoters in which witnessed inflows of more than €10.000,over the course of 2023, while 554 fund promoters faced outflows over the same time period. As for the overall fundflow trend, it is not surprising that the majority of promoters who offer mixed-assets funds faced outflows over thecourse of 2023.
In more detail, BlackRock—the largest asset manager in Europe—enjoyed the highest inflows in mixed-assets funds(+€8.1 bn), followed by St. James Place (+€5.2 bn), True Potential (+€3.8 bn), BNP Paribas AM Funds (+€3.5 bn),
and SPW (+€2.4 bn).
These numbers may somewhat confirm the assumptions made before about the use of mixed-assets products byfinancial advisors and subadvised pension products. Nevertheless, all assumptions made based on the overall fundflow numbers can’t be verified by data, as it is not disclosed which investor buys or sells a respective product.

Graph 17: The 20 Best-Selling Promoter of Mixed Asset Funds in Europe – January 1 – December 31, 2023
(Euro Billions)

Source: LSEG Lipper

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European Fund Industry Review: 2023

Flow Trends in Money Market Funds
Since money market funds were the best-selling asset type for the year 2023 and hold a market share of 12.47% of
the overall assets under management in the European fund management industry, it is worthwhile to briefly review
the trends in this market segment. As ETFs play only a minor role in the money market segment, we don’t review theflows by product type.
In a market environment with increasing interest rates and inverted yield curves, it is no surprise that money market
funds were the asset type with the highest inflows over the course of 2023. This is because the inverted yield curves
mean that money market products offer a better yield than medium- or even long-term bond products. Nevertheless,bond funds were the second best-selling asset type over the course of 2023 in Europe despite these market
conditions.

Graph 18: Estimated Monthly Net Flows in Money Market Products (Euro Billions)

Source: LSEG Lipper

As graph 13 shows, money market products had only three months with estimated net outflows over the course of2023. This means in turn that money market products enjoyed inflows for the other nine months.
Graph 13 also shows a spike in money market flows for October 2022. This spike in fund flows was triggered by theturmoil in the U.K. government bond segment and the resulting impact on pension funds using LDI strategies after theannouncement of the so-called “mini-budget” by the former U.K. prime minister. The announcement drove the interest
rates for U.K. government bonds up which caused their prices to fall. As a result, the managers of pension funds
received margin calls and needed cash to fulfill their obligations from the instruments used for the LDI strategies. The
additional collateral was invested in money market products. In fact, the flows into money market products after themargin calls in October 2022 (+€125.1 bn) were the highest monthly inflows in money market products in history.

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European Fund Industry Review: 2023

Money Market Fund Flows by Lipper Global Classification
In the aftermath of the LDI crisis it was no surprise to see that Money Market GBP (-€43.2 bn) had the highest
outflows from money market flows. In fact, Money Market GBP was the Lipper Global Classification with the highest
outflows overall. These outflows were caused by the normalization of the market environment, which eased up thepressure on the asset managers of LDI strategies to hold low risk assets. As a result, the respective asset managers
could start to decrease their positions in money market GBP and invest the respective cash in riskier assets, as theiravailable risk budgets were increasing.
More generally, Money Market EUR (-€107.7 bn) was the best seller within the money market segment, as well as for
the European fund industry overall for 2023. The classification was followed by Money Market USD (+€97.6 bn) andMoney Market CHF (+€2.8 bn). At the other end of the spectrum, Money Market GBP (-€43.2 bn) suffered the highest
net outflows in the money market segment and overall, bettered by Money Market SEK (-€0.7 bn) and Money Market
JPY Leveraged (-€0.2 bn).
These flow numbers show that the flows in money market products in Europe are concentrated in funds which invest
in the major currencies, even as there are a lot of money market funds available to European investors which are
based on other European or global currencies.

Graph 19: Estimated Net Flows in Money Market Products by LGC – January 1 – December 31, 2023 (EuroBillions)

Source: LSEG Lipper

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European Fund Industry Review: 2023

Money Market Fund Flows by Promoter
JPMorgan (+€42.5 bn) was the best-selling fund promoter for money market funds in Europe over the course of 2023.
It was followed by BlackRock (+€28.6 bn), BNP Paribas (+€20.9 bn), HSBC (+€19.0 bn), and Morgan Stanley (+€17.6
bn).

Graph 20: The 20 Best-Selling Promoter of Money Market Funds in Europe – January 1 – December 31, 2023
(Euro Billions)

Source: LSEG Lipper

By looking at the fund flows, one needs to bear in mind that the flows in money market products are impacted by a
combination of asset allocation decisions of portfolio managers and corporate actions such as cash dividends or cash
payments since money market funds are also used by corporations as replacements for cash accounts.
Several market observers see the high amount of money invested in money market funds over the course of 2023 asmoney which is somewhat benched by investors and will be reinvested in long-term products in the near future.
My view on this topic is somewhat different since I assume that a high percentage of the inflows is money from retailinvestors who want to capture the high returns from money market funds instead of holding the respective cash in acash account at a bank. These accounts do in general pay significant lower interest rates as currently achievable withmoney market funds. This means this money will be used for other purposes than investing in the future, hence will
not be invested in long-term products in the future.

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European Fund Industry Review: 2023

Fund Flows by Lipper Global Classifications, 2023
A closer look at the best- and worst-selling Lipper Global Classifications for 2023 shows that European investors are
somewhat in a mixed mood with regard to their risk appetite since money market products dominated the table of thebest-selling Lipper Global Classifications.
As graph 2 shows, mixed-assets products faced the highest outflows over the course of the year 2023, while money
market products enjoyed the highest inflows. Given the overall trend it was not surprising that the table of the bestselling Lipper Global Classifications is dominated by bond and money market classifications, while mixed-assets
classifications dominated the other side of the table.
Money Market EUR (+€107.7 bn) was the best-selling Lipper global classification for the year. It was followed by
Money Market USD (+€97.6 bn), Target Maturity Bond 2020+ (+€59.8 bn), Equity Global (+€56.8 bn), and Bond EUR
Corporates (+€22.9 bn).
Graph 21: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, January 1 –December 31, 2023 (Euro Billions)

Source: LSEG Lipper

Given the current market environment, it was not surprising to see so many mixed-assets classifications on the
opposite side of the table since European investors seem to be readjusting their portfolios to the new environment in
the bond markets after the central banks around the globe may end their interest rate hiking cycles. Money Market
GBP (-€43.2 bn) faced the highest outflows for the year. It was bettered by Mixed Asset EUR Conservative – Global(-€27.8 bn), Mixed Asset EUR Flexible – Global (-€24.4 bn), Mixed Asset EUR Balanced - Global (-€19.7 bn), andEquity U.K. (-€18.3 bn).
As mentioned above, it is noteworthy that the estimated flows in money market sectors are not only a reflection ofasset allocation decisions of investors since these products are also used by corporates as a replacement for cash
accounts. In addition, one needs to bear in mind that the outflows from Money Market GBP are the aftermath of the
LDI crisis. It is also important to recall that the yield curves in the Eurozone and other parts of the world are currently
inverted, which means that money market instruments offer a higher yield than medium- or long-term bonds.

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European Fund Industry Review: 2023

Equity Japan – A Rally Without Investors?
The bull market driven by the Magnificent Seven was obvious to market observers and investors over the course of2023. But there was another bull market which has been somewhat ignored by European investors—Japanese blue
chip stocks. While the Nikkei 225 TR gained 18.42% (in EUR) over the course of the year, Europe-domiciled mutual
funds and ETFs classified as Equity Japan gathered only +€1.1 bn of estimated net inflows. Given the fact that Equity
Japan can be considered as one of the core asset allocation building blocks, the relatively low inflows into Equity
Japan are somewhat surprising, especially as a number of prominent portfolio managers and economists haveforecasted a bull market in Japan in public.
That said, it looks like European ETF investors have embraced the Japanese bull market in their portfolios since
ETFs classified as Equity Japan enjoyed estimated net inflows of +€3.9 bn, or 4.25%, of the overall flows in equity
ETFs in the European ETF industry over the course of 2023. This in turn means that actively managed mutual funds
classified as Equity Japan faced outflows of +€2.8 bn over the course of 2023.

Graph 22: Performance Nikkei 225 TR (in EUR) and Estimated Net Flows 01.01.2023 – 31.01.2024 (in bn EUR)

Source: LSEG Lipper

Nevertheless, it looks like European ETF investors do underweight Japan in their portfolios, since the assets undermanagement in ETFs investing in Japanese blue chips do only account for 35.2 bn EUR, or 3.12%, of the overall
assets under management invested in equity ETFs in Europe. This percentage is way below the weighting of Japanin standard global equity indices. Nevertheless, Equity Japan is the eighth largest Lipper global classification for ETFs
in Europe.

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European Fund Industry Review: 2023

Graph 23: Nikkei 225 CR 31.08.1984 – 31.01.2024 (Month End Values – in JPY)

Source: LSEG Data & Analytics

But why have European investors in general somewhat ignored the rally in Japanese blue chips? From my point ofview one reason for this might be the fact that investors have heard the story of the rebound of Japanese stocks too
often and may have thought, this is just another time where valuations in Japan look attractive, but the performanceof the respective stocks might become once again a disappointment. But this time seems to be different since the
Nikkei 225 is chasing its all-time high despite some economic headwinds.

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European Fund Industry Review: 2023

Fund Flows by Promoters, 2023
The largest fund promoter in Europe, BlackRock, (+€107.8 bn) is also the best-selling fund promoter in Europe overthe course of the year, ahead of JPMorgan (+€40.4 bn), HSBC (+€29.6 bn), Vanguard (+€28.1 bn), and DWS (+€19.3
bn). As for the monthly flows, it was not surprising to see that ETFs played a major role for inflows and the respective
league table positions of BlackRock, JPMorgan, Vanguard, State Street Global Advisors, DWS, and BNP Paribas.
By looking at these numbers, one needs to bear in mind that the flows in the money market segment over the courseof 2023 have a significant impact on the flow numbers and positions in the league table of the best-selling fundpromoters in Europe.

Graph 24: Ten Best-Selling Fund Promoters in Europe, January 1 – December 31, 2023 (Euro Billions)

Source: LSEG Lipper

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European Fund Industry Review: 2023

Promoter Activity
Fund Launches, Liquidations, and Mergers
Within the current market environment, one would expect that the promoters of mutual funds and ETFs may holdback product launches and focus on the restructuring of their product ranges by liquidating or merging unprofitableproducts. Contrary to this expectation, the number of funds in the European fund industry increased over the courseof Q1 2023 (+202), Q2 2023 (+115), and Q3 2023 (+44). Only Q4 2023 (-20) showed a reduction in the number offunds. Generally speaking, it looks like the activity of European fund promoters in terms of fund launches,
liquidations, and mergers is further in a business-as-usual mode, as 2023 was the sixth year of growth since Lipper
began to study these developments in 2012. Nevertheless, compared to previous years the overall number of fundliquidations has gone up, while the number of fund mergers and launches has gone down.
The net increasing number of funds for 2023 occurred in an unstable and hard to predict market environment withestimated net outflows from mutual funds but increasing assets under management. Therefore, it was somewhat
surprising that fund promoters showed a generally lower level of activity regarding the maintenance of their existingproduct ranges. In more detail, the number of fund liquidations (845) and mergers (696) were below the long-term
annual average (1,150 and 914, respectively), while the number of fund launches (1,882) was slightly above the longterm four quarter average (1,874). Nevertheless, the growth trend for the overall number of funds available toinvestors in Europe was not offset by the drop in the number of fund mergers and fund launches, even as we
witnessed an increased number of fund liquidations. The overall number of funds increased by 341 for 2023.
One of the reasons for the mergers and liquidations at the fund level were restructurings of the general productofferings. For example, some fund promoters may merge funds with a similar investment objective to strengthen theirproduct ranges. Another trend which we witnessed since 2022 was the launch of equity funds ranges in Ireland and amerger of existing products into these products. The shift from continental European domiciles to Ireland is caused by
tax advantages from double taxation agreements between Ireland and the U.S. and possibly other regulatory
arbitrage for UCITS products between the two jurisdictions.

29European Fund Industry Review: 2023

Lower profitability because of a lack of assets under management might have been another reason why fundpromoters merged or liquidated some funds. At the top-line level, the activity of fund promoters with regard to fundlaunches and liquidations seemed to be in line with the activity over the other years covered in this report, as we don’t
witness any excess activity for fund launches, liquidations, or mergers. Since the implementation of new regulations,such as EU Taxonomy or MiFID II does increase the cost for maintaining a fund, we expect that the trend of
consolidation of small funds will continue in 2024 and beyond.

Graph 25: Fund Launches, Liquidations, and Mergers

Source: LSEG Lipper

European fund promoters liquidated 845 funds over the course of 2023, while 696 funds were merged into otherfunds. In contrast, European fund promoters launched 1,882 funds. This means the overall number of primary funds
in Europe increased by 341 products over the course of 2023.
A more detailed view shows that equity funds experienced the highest number of liquidations (297) and launches(606) for 2023, while mixed-assets funds witnessed the highest number of mergers (263). These numbers
correspond to the figures for the fund promoter activity for 2022. With regard to the broader trends in financial
markets and the trends in the European fund industry, it was not surprising equity funds showed the highest numberof fund launches and liquidations given that equities is the asset type with the highest number of products within theEuropean fund industry. The underlying trends for the high activity in this sector might be the current market
environment and the trends toward passive and/or ESG-related products. Especially the latter is also true for otherasset classes.

30European Fund Industry Review: 2023

The decreasing number of new mixed-assets products (-5) and the high number of fund mergers in this segment
might be seen as a sign of market saturation and a reaction on the outflows from these products over the course of2023. That said, even in years with estimated overall net inflows not all mixed-assets funds were able gather inflows
since the flows into mixed-assets products were somewhat concentrated. That said, the concentration of fund flows
toward a small number of funds may fuel fund launches and mergers since promoters may want launch products withsimilar investment objectives as the successful funds and support the assets under management of those funds bymerging them with other products. This is because this move increases the assets under management of the new
products and make them more attractive for investors.

Graph 26: Fund Launches, Liquidations, and Mergers 2023 by Asset Type

Source: LSEG Lipper

Disclaimer:
The views expressed are the views of the author and not necessarily those of LSEG.
LSEG Lipper delivers data on more than 330,000 collective investments in 113 countries. Find out more.
This material is provided as market commentary and for educational purposes only and does not constitute investment researchor advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information
provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.

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European Fund Industry Review: 2023

For more information, please contact our LSEG Lipper Research Team:
Detlef GlowHead of Lipper EMEA Research
Phone: +49(69) 75651318
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Global Head of Research, Lipper
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Phone: +44 207 5423393
dewi.john@refinitiv.com

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