Investors pull more than $60b from mutual funds in January

29/02/2016 06:13 AST

Investors pulled more than $60 billion (Dh220 billion) from mutual funds globally in January, marking the worst month of outflows since the height of the financial crisis. The outflows were most acute for European mutual funds, with investors redeeming €42.6 billion ($47 billion; Dh171 billion), according to Thompson Reuters Lipper, the data provider.

Amin Rajan, chief executive of Create Research, the consultancy, said: “Investors have become ultra jittery about market contagion. They ran for the hills after the meltdown in Chinese markets at the start of 2016.”

Although the outflows are a significant concern for asset managers, the fact that the redemptions were met without any big problems will assuage some of the fears that asset managers represent a systemic risk to financial markets.

“No liquidity problems have been evident,” said Mr Rajan. Speaking at an FTfm (Financial Times’review of the fund management industry) event last week on potential liquidity issues, Martin Parkes, director of government relations and public policy at BlackRock, the world’s largest asset manager, said: “The fund management industry is on top of this. Liquidity issues have not just been around since the Lehman collapse. One of the first client presentations we gave on fixed income some 28 years ago placed liquidity risks firmly at the top of the agenda.”

The scale of January’s fund redemptions has raised concerns about the growth prospects for asset managers, according to David McCann, an analyst an Numis Securities, a stock broker.

McCann has downgraded his outlook for Henderson Global Investors, after the £92 billion (Dh468 billion) fund house warned earlier this month that the difficult market conditions in January could affect its short-term growth plans.

Andrew Formica, chief executive of Henderson, said: “The first few weeks of 2016 have been challenging for investors and our clients, with a wide range of economic and geopolitical risks weighing on markets.”

January marked the worst start to a year for markets in at least two decades. More than $2.3 trillion was wiped off global stocks in the first week alone, amid fears about China’s slowing economy and currency depreciations.

According to Lipper, the last time global outflows were this large was in September 2008. Haley Tam, an analyst at Citi, the US bank, said: “Fundamentally, the outlook is quite negative for the asset management industry in 2016.”

Gulfnews