Europe's asset management sector enjoyed strong inflows and AuM growth last year.

Europe’s asset management industry saw net inflows and assets under management (AuM) hit record highs in 2017, according to Morningstar asset flows data. 

Record net inflows for the year took European-domiciled open-end funds to €8.9 trillion ($10.9 billion) under management, up from €7.96 trillion in 2016.

Data from until month-end December 2017 showed that European managers saw net inflows of €682.8 billion for the year, with fixed income products raking in a record €288 billion. Inflows to allocation funds amounted to €134.6 billion, close to the record levels of €136.0 billion seen in 2014.

Open-end equity funds pulled in net €106.9 billion, reversing the net outflows of €57.5 billion seen in 2016.

The combined inflows to open-end index funds and exchange-traded funds reached €162.4 billion, at an organic growth rate of 14.7 per cent.

While actively managed funds took higher inflows in absolute terms, a growth rate of 8.5 per cent year on year meant passive funds increased their market share from 15.2 per cent in 2016 to 16.0 per cent at year-end 2017.

The market share of passive fixed income funds rose only slightly from 11.8 per cent to 12.0 per cent year on year.

“As markets gave investors a smooth ride with no bouts of volatility rocking the boat, investors flocked to the fund market in 2017 highs,” said Ali Masarwah, director, EMEA editorial research at Morningstar. “Both active and passive strategies saw record inflows throughout the year as a result, although we continued to see the trend of passive products increasing their market share.”

Masarwah added: “It was a record year for bond funds with €288 billion flowing into fixed income products, largely driven by investors targeting higher-yield assets through flexible bond funds. However, it remains to be seen if this trend will continue following a bond market sell off in the first month of 2018, and further structural changes to come through the tapering of the European Central Bank’s bond-buying programme.”