Eighteen months of accumulated investment fund returns evaporated through recent price losses

Dutch investment funds incurred heavy losses  

In 2019, investment funds had achieved the highest returns since the financial crisis (see DNB's statistical news release). These returns were more than offset in one stroke in the past quarter. As a result of the coronavirus crisis, stock exchanges worldwide declined, causing investment funds to suffer significant losses. Investment funds recorded negative returns of 11.7% on average in the first quarter. Almost 90% of the assets managed by Dutch investment funds are held by Dutch pension funds and insurers.

Equity funds fell back hard, while bond and hedge funds remained relatively stable  

Figure 1 shows that there are large differences behind average returns. Equity funds lost on average 19.4% in the first quarter of 2020, real estate funds 8.4%, private equity and other funds 7.1%, bond funds 4.1% and hedge funds 1.3%. Where the average Dutch investment fund lost six consecutive quarters of accumulated returns, the returns of equity funds were thrown back no less than ten quarters. These funds lost the returns they had accumulated since the third quarter of 2017. Of all types of funds, equity funds had achieved the highest returns in 2019. The returns of bond funds remained more stable. Although their returns had been lower in recent years than those of equity funds, bond funds in the past quarter only lost three quarters’ worth of accumulated returns. Real estate funds and private equity funds were in between, having lost approximately four to six quarters of accumulated returns, just like hedge funds and other funds.

Sharp decline in assets managed

Assets managed decreased by 12.9% in the past quarter to EUR 816.3 billion. This decline is mainly caused by price losses, but also by withdrawals. Pension funds, for instance, sold investment fund units worth EUR 11.4 billion. This mainly involved a shift from investment through investment funds to direct holdings. Then again, insurers bought EUR 0.9 billion in investment fund units. The withdrawals amounted to EUR 14.5 billion, mainly representing sales by equity funds and hedge funds. In contrast, limited net inflows were seen among bond funds (EUR 0.4 billion), real estate funds (EUR 0.7 billion) and mixed funds (EUR 0.8 billion).

This report refers to the situation at the end of the first quarter of 2020. Since then, stock exchanges around the world have made up for some of the losses. In April 2020, the S&P composite index increased by 12.9%, the FTSE Eurotop 100 increased by 4.7% and the MSCI World Index by 11%. Given the current volatility of stock exchanges, this news release should be interpreted as a snapshot.