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Private investors flock to mutual funds following setback

Far from all portfolio managers in Danish investment managed to beat their 2016 benchmarks. However, that does not keep investors from putting their savings in that basket, not least in January this year – and the reason is clear.

It has become evident to Danish private investors that depositing money in banks is not a good deal. Private investors by the thousands have sought out Danish mutual funds in recent years, and the trend continued throughout January this year, says the Danish Investment Fund Association (IFB), citing numbers from VP Securities.

"Over the course of January, 5,000 new private investors decided to place their money in mutual funds," IFB writes in a press release, which also states that 80,000 new investors have joined the bandwagon since January 2015. All in all, approx. 840,000 Danes now have parts of their savings in mutual funds. Anders Klinkby, CEO, says:

"The development proves that many Danish savers are looking for higher yields than the zero interest rate that a bank account offers. If you want a chance of of higher yields, you have to undertake a bigger risk. This can be done easily and prudently through mutual funds, which offer a good diversification of risk regardless of the amount of money invested. In that way, saving in mutual funds is available to anyone."

An uphill struggle to improve results

FWAM recently examined yields in Danish mutual funds, and the conclusion reached was that portfolio managers in Danish mutual funds were struggling to beat their 2016 benchmarks. A review of return statistics from IFB showed that the majority of funds in the big categories did not beat their 2016 benchmarks. The categories in question are Danish Stocks, Emerging Markets Stocks, Far East Stocks, and the biggest category, Global Stocks.

Beating the benchmarks has proven difficult when it comes to diffent kinds of bonds as well. The majority of funds in these categories Danish Bonds, Emerging Markets Bonds, and Investment Grade Bonds did not manage to beat their benchmarks.

"If you look at yields on Danish stocks, it is evident that many have struggled more in 2016 than before. Many funds did well if you go back three or more years, and the median was higher than benchmark," said Anders Klinkby at the time, and added:

"This is, among other factors, a result of portfolio managers choosing correctly out of the large and medium-sized Danish companies. But if you look at 2016, big stocks have tended to perform best - with the exception of Novo Nordisk.

With the development of the last few years, funds are close to a pre-financial crisis standard for investors, says Finans.dk, which has looked further back: In the summer of 2007, 875,000 private investors had placed money in Danish mutual funds. This number was down to 760,000 at the end of 2014.

Mutual funds Danish Stocks

Yields in 2016, all expenses deducted.

English Edit: Marie Honoré

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