Funds haemorrhage capital in Portugal

Investors are taking their money out of funds with redemptions outstripping subscriptions in January for the fourth consecutive month.

Experts in the sector believe that the reason could be to do with capital gains. Nevertheless, the amount of assets under management remained largely unchanged at the start of the year.
It is part of a worldwide trend. China suffered its first net outflow of funds in five years in 2023 as economic stagnation diminished the market’s power to retain capital.
Investors also pulled record sums from US equity funds tracking Saudi Arabia because the current war in the Middle East between Hamas and Israel.
In January, 2024, the value of assets managed by collective investment undertakings stood at €18.613Bn, reflecting a stabilisation on the previous month according to the monthly report from the Portuguese Association of Investment Funds, Pensions and Patrimonial Assets (Associação Portuguesa de Fundos de Investimento, Pensões e Patrimónios (APFIPP).
Over the past 12 months, the value of assets managed by funds increased 6.7%.
Despite asset values remaining stable, savings coming in are not compensating for redemptions. In January the volume of subscriptions stood at €260.6 million, while the amount of redemptions was €351.8 million, resulting in a negative balance of net subscriptions of €91.2 million.
The amount was higher than the €76.5 million that was redeemed in December. In November redemptions stood at €88.6 million while in October €82 million was redeemed.
At the end of January there were €18.6Bn of assets under management in Portugal, in line with the end of 2023.
João Pratas, president of the APFIPP told business daily Negócios that in 2022 the profitability of collective investment undertakings had been hit significantly, but the recovery of the markets at the end of 2023 allowed much of these losses to be recovered, encouraging a wave of redemptions to take advantage of a break-even situation.
Also there has been stiff competition from fixed-term deposit accounts that are starting to offer better rates of return, which has meant investors shifting their money out of funds and transferring them to savings accounts.
“These in essence are the main reasons that explain the redemption we’ve seen in recent months and which could continue for some time”, he said.