Financials-Focused Funds Show Signs of Promise

August 25, 2021 — London

European investor demand rises during the first half of 2021

There are signs of a return in appetite for financials among Europe’s fund investors, with inflows and assets under management on the increase, according to the latest issue of The Cerulli Edge―European Monthly Product Trends.

Investment performance in the financial sector lagged the wider recovery story seen in markets last year following the outbreak of COVID-19, notes Cerulli. Economies being put on pause for long spells was bad news for most companies operating in the sector. The MSCI Europe Financials Index was down 15.6% in 2020, whereas the wider MSCI Europe saw a 5.9% gain. However, trading activity in the former gained momentum toward the end of the year and is already up 17.9% this year.

“Cerulli’s research indicates that asset and wealth managers are positioning their portfolios with attention to cyclical sectors such as financials and industrials and economies that should benefit from a coronavirus recovery,” says Fabrizio Zumbo, the firm’s associate director of European asset and wealth management research. A recent Cerulli survey of asset managers in Europe found that more than one in four (26.5%) respondents expect demand for finance-themed funds to grow over the next 12 to 24 months.

However, the financial services sector is still not yet in the clear, says Zumbo, explaining that it is yet to recover fully from the loss of trust in financial institutions stemming from the 2008 financial crisis.

Investing in digital assets may benefit the financial industry, with some 34% of the exchange-traded fund issuers Cerulli surveyed expecting digital assets to be among their clients’ top three investment themes. However, the topic of cryptocurrencies continues to divide opinion in the market based on fears of cybercrime, money laundering, environmental damage, and fraud. The U.K.’s Financial Conduct Authority has warned consumers to be wary of scams relating to crypto assets.

“The financial services sector consists of a wide range of companies, including disruptive digital payment providers and cryptocurrency exchanges, as well as traditional banks and money managers. Investors around Europe may well take a second look at funds that offer access to themes likely to contribute to both the near-term economic recovery and long-term growth,” says Zumbo.

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Note to editors

These findings and more are from The Cerulli Edge—European Monthly Product Trends, August 2021 Issue.

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