Europe puts its money where its mouth is
Recent predictions from the fund industry that the number of assets held in European mutual funds is on course for an explosion, have been given some extra weight by a recently published report by Salomon Smith Barney. According to the report, Europe put almost as much money into mutual funds in the first half of 1998 as the US.
Taking figures from the most active countries - France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland and the UK, total inflows into mutual funds amounted to $224bn compared with $257bn in the US over the same time period, according to the report.
European mutual fund assets have now passed the $2trn mark, though still a way behind the US which boasts over $5trn in mutual fund assets.
Equity funds were the fortunate recipients of a $57bn cash injection with the Italian investors placing the largest amount of assets, estimated at $23.4bn . One of the most popular forms of investment for many fund investors, was mixed funds, which received a total of $55.8bn over the first six months of the year. And bond funds still seem to be the most popular of all with $96.1bn invested, the majority of which again, interestingly, came from Italy ($75.5bn). Italy was in fact the leading mutual fund buyer as a whole in Europe over the period, investing a total of $116.8bn in mutual funds - over half the entire amount European investors allocated as a whole.
With the onset of the Euro, the general consensus within the funds industry has been that European investors will diversify their assets internationally, with predictions that Europe will view itself as a whole in a domestic capacity. The Salomon Smith Barney figures certainly support this. Out of the total $224bn invested, $147bn was invested internationally, $50bn of which went into foreign equities in the first quarter alone.
However the report notes that the majority of 'foreign investment' is in fact investments by Europeans into Europe. Taking France as an example, being one of the largest investors abroad, investing approximately two thirds of its new money into foreign equity funds, 82% of this was dedicated to European assets.