Declining Popularity of European Equity Funds: Reasons and Impact on Global Investors

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Europe is only becoming less and less popular among the world’s investors.

Last week marked the 16th in a row where investors took money out of European equity funds, write Bloombergwhich refers to figures from Bank of America and the data provider EPFR Global.

So far this year, there have been withdrawals from European equity funds for $27 billion and just last week there were net sales of $4.6 billion, the biggest decline among any major region in the world.

The trend thus goes back a year and a half and can have many reasons.

War and energy crisis

Not only has Russia’s invasion of Ukraine last winter ensured increased geopolitical unrest, but the war also brought with it an energy crisis.

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Many countries in Europe are still suffering from the after-effects of the sharp rise, particularly in gas prices, although inflation figures from the region have shown positive signs in recent months.

At the same time, it’s no secret that investors have a very special fondness for the giants in the US, especially in technology. Both the Nasdaq Composite and the Nasdaq 100 are on pace for their best half-year in decades as 2023 approaches the halfway mark, while Apple recently passed a historic market cap of $3 trillion.

The withdrawals from European equity funds are a picture of a clear trend where more people are looking towards growth companies, while more optimistic macroeconomic prospects in the US may also have played a role.

The broad Stoxx Europe 600 index has risen 7.7 percent so far this year, while the FTSE 100 index in London has fallen 0.3 percent since the turn of the year. In the US, the broad S&P 500 index has risen over 16 per cent, while the Nasdaq Composite is up over 30 per cent.

– Exposure to the tech companies is what drives the regional transactions once again. This benefits US stocks and the dollar. American investors, for their part, have started selling European shares for the first time this year, due among other things to weak macroeconomic figures in the region, Barclays strategist Emmanuel Cau wrote in an analysis earlier this week, reproduced by Bloomberg.

Oslo Børs far behind

If you think the development of the major indices in Europe was so-so, there is little consolation to be found here at home.

The main index on Oslo Børs has struggled to find its footing all year, and at one point was down almost four percent for the year, at the bottom at the end of March. Since then, it has certainly picked up somewhat, but the result is still a very modest increase of only 2.1 per cent so far in 2023.

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