Börse Express – Funds remain in demand in Austria – ESG becomes mainstream
The war in Ukraine and the sanctions imposed on Russia, the enormous rise in prices and the turnaround in interest rates have led to a setback on the international capital markets. Naturally, this also affected Austrian investment funds. “Fortunately, investors have learned from events and have not exhibited ‘herd behavior’. They stayed invested and continued to buy,” emphasizes Dietmar Rupar, Secretary General of the Association of Austrian Investment Companies (VÖIG) at a press conference on the occasion of World Fund Day 2022, which the fund associations traditionally celebrate together. It is particularly gratifying that the net inflows of funds are quickly made entirely in the area of mutual funds. Rupar speaks of a maturing process: “Investors have had good experiences with funds in recent years and know that the capital markets are not a one-way street. They therefore see setbacks as an opportunity and less as a danger.”
Since the beginning of the year, the Austrian fund volume of securities management companies (VWGs) has fallen by around 5 percent to EUR 208 billion compared to the end of 2021. At the end of the first quarter of 2022, net inflows of funds amounted to around EUR 1.3 billion, with institutional investors accounting for EUR 59 million and retail funds for EUR 1.2 billion. The asset management funds achieve a net cash inflow of around EUR 1.6 billion. There were net cash outflows of around EUR 144 million in the bond fund segment and EUR 166 million in the equity fund segment. The total amount of distributions in the first quarter of 2022 was EUR 461 million and the price losses are believed to be around EUR 11.7 billion.
Best-performing derivative funds and equity funds in North America
In the 1-year period, derivative funds performed at 12.2 percent, equity funds in North America at 10.1 percent, equity funds in international equities at around 7.2 percent and equity funds in Europe as a whole at 5.7 percent. Equity funds in Austria performed at 3.7 percent. Real estate investment funds performed at +2.2 percent. (See appendix for performance details). The other categories performed negatively.
International fund industry: largest growth for 15 years
In 2021, the international fund sector experienced the largest increase in terms of volume in fund assets involved in 15 years. The net assets of the open funds registered worldwide have increased from 55 trillion. euros at the end of 2020 by 12 trillion. to 67 trillion. euros increased in 2021. This corresponds to an increase of 22 percent. At 47 percent, equity funds are by far the largest asset class, followed by bonds (20 percent) and mixed and money market funds, each with 12 percent. North and South America account for more than half of the fund volume (53 percent). 33 percent come from Europe and at least 14 percent from the Asia/Pacific region.
Thomas Loszach, Chairman of the Association of Foreign Investment Companies in Austria (VAIÖ), attributes this brilliant development on the international fund markets to several reasons: “The macroeconomic environment and the continued low key interest rates are the biggest incentive to invest in funds in the search for returns. The general economic upswing after the peak of the Corona crisis has also fueled the willingness to invest, as have price developments on the stock markets.” Regardless of the short-term market developments, Loszach is observing a new trend among investors: “More and more young people are showing an open mind to put their money elsewhere than to invest in the savings account. Numerous FinTechs are breaking down barriers and opening up the market for new groups of investors. Hear it differently: Investing will be cool!”
Both the strong growth in the affected fund assets and the opening of the markets for new, sometimes inexperienced investor segments require a responsible approach on the part of the fund industry. “As trustees of our customers, it is our duty to deal responsibly with the capital entrusted to us,” emphasizes Thomas Loszach and continues: “This sense of responsibility is not based on short-term speculative gains, but rather on old-age provision. Fund savings could play a much larger role in the second and third pillars of old-age provision. But especially in Austria, the legal framework is not ideal. The domestic policy is challenged here to get inspiration from other countries such as England, the Netherlands or Switzerland. We forget not that a stronger private or company provision could actually relieve the state pay-as-you-go system. This is coming under more and more pressure.”
Sustainable investment funds going mainstream
Climate change and the need to transform the European economy into sustainable energy sources have reconciled Austrians with the capital market. The combination of helping with decarbonization “financially” and at the same time trying on the capital market has led to a change in investor behavior. “Funds that follow criteria when selecting sustainable stocks are at the top of the list of priorities,” emphasizes VÖIG Secretary General Rupar.
The Austrian fund volume of sustainable investment funds has fallen by around EUR 337 million to EUR 27.5 billion or 1.2 percent since the beginning of the year.
At the end of March 2022, the equity fund volume of the sustainable investment funds was EUR 7.9 billion, the fund volume of the asset management funds was EUR 11.6 billion, that of the sustainable bond fund was EUR 7.2 billion and the fund volume of the sustainable real estate fund was 0, 8 billion euros. The net inflow of funds from sustainable investment funds amounted to EUR 737 million in the first quarter of 2022.
The 1-year performance of the sustainable equity funds was 6.3 percent and the mixed sustainable portfolios are up 0.1 percent. In the 10-year period, sustainable equity funds increased in value by 5.8 percent annually, sustainable mixed funds show an annual increase of 3.3 percent pa
Integral survey: Sustainable investments are important to 68 percent of those surveyed
An INTEGRAL survey carried out on behalf of VÖIG (survey period March 7-21, 2022) shows that 35 percent of those who invest money in the form of funds, shares and bonds have a positive to very positive attitude. In 2016, this figure was still 29 percent. More than a third of the Austrians surveyed said they owned securities. 7 out of 10 securities owners do not plan to sell securities due to the current situation on the financial markets. Only 12 percent are unsure and would like to do so.
Compared to the previous year, the importance of advice in the bank as a source of information on financial investments has increased again. Online information is also gaining in importance: the Internet in general, financial blogs and forums, and online offerings from banks and capital investment companies.
Of the topics surveyed, renewable energies met with the greatest interest: 72 percent of those surveyed were very or somewhat interested. This is followed by the topics of devaluation/protection against inflation, real estate investments, shares as well as biotechnology and pharmaceuticals. A negative attitude is shown exclusively towards cryptocurrencies. The emerging markets are also currently not in “fashion” among investors.
The pandemic and high energy prices have had a positive impact on attitudes towards sustainability. For 68 percent of the cases, sustainable investments are important, for 29 percent they are even more important than they used to be. For only 13 percent it has never been important and it is not now.
Rupar recalls the European Union Disclosure Regulation that came into force on March 10 of the previous year. Since then, all financial products, including investment funds, have had to be classified in terms of their sustainability. This is intended to create more transparency for sustainable investments in financial investment products. “The new classification and the transparency rules on the effects of sustainability risks are helping to ensure that sustainable funds are increasingly in demand.”
Open-ended real estate funds reach a new record
The open-ended real estate investment funds have increased their fund volume by 1.4 percent to around EUR 10.9 billion since the end of 2021, with net inflows increasing to EUR 106.1 million. EUR and the price gains to around EUR 42.0 million. The 5 real estate investment fund companies act on 14 funds (9 public funds and 5 special funds). The average 1-year performance was 2.2 percent. The 10-year performance was 2.4 percent.
Fund industry in Austria celebrates World Fund Day for the 10th time
On April 19, the Austrian financial sector will start World Fund Day for the ninth time. This day is dedicated to the father of the fund idea, Dutchman Abraham van Ketwich who was born on April 19, 1744. Ketwich recognized that with the help of a fund, risk diversification would be significantly improved while at the same time reducing the costs for each shareholder. This laid the foundation for today’s modern investment fund.