Decline in European Equity Investment by Asset Managers
Investment in European equities by asset managers has decreased by nearly one-third since 2015, as highlighted in the latest report from the European Fund and Asset Management Association (EFAMA).
Shift in Equity Holdings
EFAMA’s 2024 Asset Management in Europe report reveals a marked shift in the asset allocation of investment funds based in the euro area. The share of listed equities issued in Europe held by these funds has dropped from 37% in 2015 to 27% by the end of last year, reflecting a 10 percentage point decline. In contrast, the proportion of listed equities sourced from outside Europe has surged from 63% to 73% during the same period.
Global Investment Trends
The report indicates that euro-area investment funds are increasingly steering their investments toward shares outside the euro zone. Vera Jotanovic, a senior economist at EFAMA and a contributor to the report, attributes this trend to the rising appeal of global equity funds, particularly those emphasizing investments in sectors like US technology.
Positive Insights from Discretionary Mandates
Expanding the analysis to include discretionary mandates and European investment funds located outside the euro area yields more encouraging findings, according to Jotanovic.
Asset Holdings Overview
European asset managers currently hold approximately €6.4 trillion in debt securities issued by the European Union, accounting for 28% of the total, alongside €3 trillion in EU-listed shares, which constitutes 27% of the total market. Notably, the allocation to debt securities issued within the euro area by funds based there has increased from 43% in 2014 to 50% by the end of last year.
“This illustrates the significant financing role that European asset managers play in strengthening the European economy,” commented Jotanovic, “and it doesn’t reflect the various other asset classes they are engaged in.”
Trends in Domestic Investments
Similar patterns are observed in the investment in domestic equities. According to EFAMA, European asset managers reduced their domestic equity allocation from 29.1% at the close of 2019 to 21.4% by the end of last year. Conversely, the allocation to domestic bonds, which dipped from 36.8% in 2019 to 34.6% in 2022, saw a rebound to 36.8% last year.
Variations Among European Countries
The allocation to domestic equities varies widely across different countries. In smaller markets, such as Turkey, Croatia, Greece, Poland, and the Czech Republic, domestic equity allocation can reach as high as 50%.
European Commission’s Focus on Competitiveness
Enhancing investment in the European economy to boost competitiveness remains a priority for the European Commission. European asset managers are recognized as pivotal in mobilizing private capital for this purpose.
Overall Growth of Assets Under Management
As of the end of last year, European asset managers held total assets amounting to €30 trillion, marking an 8.3% increase in 2023, driven by rising equity and bond valuations. EFAMA projects that assets under management in Europe could reach a new peak of €32.7 trillion by the close of the third quarter of 2024.
