Mutual Funds in 2011

Helsinki 12.1.2012

Mutual Funds in 2011:
Mutual fund investors remain calm in unstable markets

Despite the crisis in Europe and the unstable condition of world’s economy, the Finnish mutual fund industry fared well during 2011. The net subscriptions during 2011 were only slightly negative, amounting to 1,7%. This percentage is just one tenth of the negative net subscriptions experienced in 2008, which was a similar year of turbulence.

The major difference between these two years is highlighted in the short term bond funds: during 2008 net subscriptions in these funds were -7,2 billion, where as in 2011 the net subscriptions were +1,2 billion. In other fund classes, however, the differences were more moderate.

The year 2011 started positively for mutual funds since during the first five months the assets under management grew by an amount of nearly 700 million euros. As a result, the assets under management were 62,2 billion euros at the end of may, the largest figure for 2011. In June, however, the unstable condition of the financial markets started to reflect on the assets under management. The impact was most severe during august, which saw a decline in the assets under management amounting to circa 4 billion euros. Out of this figure, 3,1 billion were due to market conditions and 0,9 billion due to negative net subscriptions. At the end of 2011, the assets under management ended up at 55,4 billion euros.

The investors were particularly interested in short term bond funds, asset allocation funds and alternative funds during 2011. The net subscriptions for short term bond funds were +1,2 billion euros, +487 million euros for asset allocation funds and +396 million euros for alternative funds. In the short term bond fund class, investors showed particular interest towards money market funds, which are considered to be low-risk funds. Investors allocated 946 million euros of new capital into these funds during 2011.

The largest redemptions were placed on equity funds, especially on equity funds investing in emerging markets. These funds experienced negative net subscriptions amounting to 1,8 billion euros. The net subscriptions of equity funds investing in the Finnish market were, however, slightly positive.


Redemption amounted to 1,1 billion euros

At the end of 2011, the total assets under management in Finnish mutual funds were 55,4 billion euros. During 2011, the total assets under management declined by 6,1 billion euros, which reflects a decline of 10%. Out of this decline, only 1,1 billion were due to redemptions. This indicates that the Finnish mutual fund investors remained calm despite the unstable condition of the financial markets.

Allocation to short term bond funds increased
18 billion euros (32,4%) of total assets under management in Finnish mutual were allocated in equity funds at the end of December. The total assets allocated in bond funds was 16,7 billion euros (30,2%) and in short term bond funds 11,4 billion euros (20,6%). Asset allocation in alternative funds was 7,9 billion euros (14,3%). Allocation in other funds, such as hedge funds, was 1,4 billion euros (2,4%).

The most notable changes in the allocation of total assets were the increase in proportion of short term bond funds (+3,9 %) and the decline in equity funds
(-7,3%).

The Allocation of Shareholders

At the end of 2010 assets under management in Finnish mutual had 2,6 million shareholders (2,7 million in year 2010) with some 800 000 being household owners. The proportion owned by households of total assets in mutual funds was 11,0 billion euros (19,8%). If including the insurance-based savings into total mutual fund investments of households, the total proportion of mutual fund investments owned by households rise to 21 billion euros or 21,7 % of total mutual fund assets.

Fund Management Companies and Funds

There are 36 fund management companies in Finland and 23 of them are members of Federation of Finnish Financial services. The total assets of fund management companies that belong to the Federation of Finnish Financial services were 99,5 % of overall assets under management. During the year 2011, two new fund management companies were established. The total number of funds domiciled in Finland, at the end of 2010, was 498. The number of foreign funds, actively marketed in Finland, was approximately 650.

The Outlooks for the Mutual Fund Markets

The mutual fund markets always reflect the mood of other security markets. The market development in Europe for 2012 is largely dependable on the political decisions that are under consideration. The investors have reacted to market uncertainties by allocating their investments towards funds that are as low risky funds as possible. The worsening market conditions, which also reflect on the real economy, could lead investors to allocate capital to funds that invest into non-European markets. Especially professional investors react rapidly to changes in market conditions.