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Insights into euro area statistics. Presenting statistics with short explanations, in an easy-to-share format

20 October 2017

Investment funds in the euro area

The value of households’ holdings of investment fund shares has increased considerably in recent years and reaches new highs. On 30 June 2017, euro area households held investment fund shares worth EUR 2,192 billion, which equals almost 10 per cent of their total financial assets.

Investment funds are an important part of the euro area financial sector. Statistics on such funds are thus significant for monetary and financial analyses.

Periods of persistent wealth gains have been interrupted by two financial market incidents (see chart 1). The first of these was the so-called "Dot-com crisis", which led to a slump in 2001. And the second was the financial crisis that emerged in 2007, which had a much greater impact – it took around eight years for the value of investment fund holdings to reach its pre-crisis level.  The overall value of a households’ investment fund holding closely follows financial market developments, as it is mainly influenced by changes in the prices of the underlying assets, e.g. bonds and equities.

Country perspective 

Despite the fact that investment funds are a growing part of the euro area financial sector, only five countries (Luxembourg, Germany, Ireland, France and the Netherlands) account for almost 90% of the total value of investment fund shares issued in the euro area (see chart 2). This means that the other 14 euro area countries only account for 10%.

A closer look at investment fund statistics

Statistics on investment funds can be broken down by the type of assets involved, i.e. the underlying investment policy (see chart 3). At the end of June 2017, bond funds accounted for the largest percentage of investment fund shares in the euro area (30%), followed by equity funds (28%), mixed funds (26%), other funds (8%), real estate funds (5%) and hedge funds (3%). 

There are considerable variations from country to country. Chart 4 shows that Latvia accounts for the highest percentage of bond fund shares, Cyprus for equity fund shares, Belgium for mixed fund shares, Lithuania for real estate fund shares, Malta for hedge fund shares, and Spain for shares in other funds. 

Investment funds are financial investment vehicles that pool together capital from private and institutional investors by issuing shares and/or units. They invest the capital collected in assets like bonds, equities and commodities. 

As financial intermediaries, investment funds perform two main functions. First, they offer investors opportunities to invest in a diversified pool of assets with a single purchase of shares/units issued by an investment fund. Second, investment funds provide a source of funding to entities in other sectors, such as banks and corporations. 

Euro area and national statistics on investment funds are available in six sub-categories according to the investment policy involved: hence there are data on equity funds, bond funds, mixed funds, real estate funds, hedge funds and other funds. Each sub-category is further broken down to distinguish between open-end and closed-end funds.

Role of investment funds in financial intermediation

Investors

(lenders)

Investment funds

(balance sheet)

Issuers

(borrowers)

 

- Financial institutions

(e.g. banks, insurance companies, pension funds)

Assets

Liabilities

- Financial institutions

(e.g. banks, insurance companies, pension funds)

 

- Deposits

- Bonds

- Equity

- Financial derivatives

- Other assets

- Shares/units

- Loans

- Financial derivatives

- Other liabilities

 

- Households

- Households

 

- Non-financial corporations

-  Non-financial corporations

 

- Government agencies

-  Government agencies

 

               

Investment fund data are important for monetary and financial analyses in several respects. First, changes in investment funds’ asset values are transmitted, through the valuation of their shares, to households and firms, indirectly generating wealth effects. 

Second, investment fund statistics provide insight into the euro area financial structure, relative to other financial institutions, such as banks. 

Third, the breakdown by investment policy provides additional information on investors’ risk preferences.  Since investment funds are large professional investors, their choices in asset investments may be indicative of portfolio diversification, which is useful for understanding and explaining financial markets developments and their impact on monetary aggregates, for example. 

Find out more about investment funds and sector accounts statistics on the ECB’s website:

 

Investment fund statistics

Compare investment funds by investment policy at euro area and national level

Compare assets of investment funds at euro area and national level

Compare investment fund shares/units at euro area and national level (dynamic visualisation)

Press releases: Euro area investment funds statistics

Monthly Bulletin, January 2003 (see the box entitled “New ECB statistics on euro area investment funds”, page 21)

Monthly Bulletin, August 2010 (see the article entitled “Harmonised ECB statistics on euro area investment funds and their analytical use for monetary policy purposes”, pages 109-22)

Statistics Bulletin (see Section 2 on “Money banking and investment Funds, in particular item 2.8. on the “Aggregated balance sheet of euro area investment funds”)

Macroeconomic and sectoral statistics: Sector accounts

Press releases: Euro area economic and financial developments by institutional sector