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Luxembourg and Dublin Dominate Fund Flows

Contributing Editor, 18 May 2005

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Offshore centres Luxembourg and Dublin saw a record inflow of €13 billion ($16,4 billion) in net sales by European investors during March. T...

Offshore centres Luxembourg and Dublin saw a record inflow of €13 billion ($16,4 billion) in net sales by European investors during March. The two centres were responsible for 62 per cent of total European sales flows in March, according FERI Fund Market Information, a research consultancy. Cross-border sales have been particularly strong in these two centres. The two offshore centres’ success was partly to do with the exceptionally large flow into their specialist money market funds of €3.6 billion in March, although equities continued to dominate the sales flow. Overall sales flows in March totalled €21 billion, down 28 per cent from the February number. On an aggregate quarterly basis, inflows during the first quarter of 2005 of €89 billion were up 12.6 per cent from the same period in 2004. “What makes the first quarter of this year so fascinating is that – to date – it’s a mirror image of last year’s sales pattern,” said Diana Mackay, managing director of FERI Fund Market Information, in a statement. She added: “Two thousand and four was characterised by a strong first quarter, followed by a further nine dismal months in the doldrums. The same fears that affected investors then, remain today, and there seems now a strong likelihood of another long and flat hot summer for European asset managers”. FERI research found that the German market underwent a dramatic asset allocation shift, with local investors pulling a record sum of €2.4 billion from their equity holdings and transferring an almost equivalent amount into the money market sector. The shift has been confirmed by the latest research from the German investment and asset management association BVI, which showed that German funds attracted a net inflow of €5.5 billion in April. A total of €3.4 billion went into fixed-income funds, €2.1 billion went into money-market funds, and €300 million in mixed funds. Equity funds saw a drain of €1.3 billion. The FERI research also found that international fund management groups are seeing the biggest inflow of European funds, as opposed to domestic-only fund management groups. International groups took 62 per cent of all European money in March, according to the FERI study. Of the €21.06 billion invested across Europe, €13.05 billion went to international groups. This compares with total inflows of €13.33 in March 2002, of which just €1.26, or 9.5 per cent, went to international groups. International groups now control assets worth €610 billion out of €3,791 billion, giving them a market share of 16 per cent of the market. The biggest beneficiaries of this trend towards international money managers have been US groups such as Citigroup, Goldman Sachs, Vanguard and JP Morgan.

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