Market turbulence knocked confidence in August but equity fund investors bought the dip

Inflows to equity funds fell sharply in August, according to the latest Fund Flow Index from Calastone. The short-lived market panic at the beginning of the month that saw stock markets worldwide fall sharply before rebounding knocked confidence and meant equity-fund inflows fell to £545m, down by three quarters (75.1%) month-on-month and to their lowest level since November 2023. But it is important to note that there were still inflows.

Calastone’s data shows investors sold down equity funds only very modestly during the sharp falls in the first three days of the month, pulling a net -£206m from their holdings. Moreover, this was followed swiftly by renewed buying – they added a net £592m to equity funds in the following five days. Later in August after markets had bounced back, some investors opted to take profits which led to modest renewed outflows in the second half of the month.

The impact was felt across most equity fund sectors, with inflows down by just over a third for global equity funds (-35%) to £639m, by half for North American equity funds (-50%) to £564m, and by just under three fifths (-58%) for European funds to £155m and similarly for emerging market funds (-59%) to £174m. Meanwhile, Asia-Pacific funds suffered a 16th consecutive month of outflows, which almost quadrupled (+260%) month-on-month to -£184m.

UK-focused equity funds saw outflows once again on the rise in August after July had seen their least-bad month in three years. Net selling of -£510m was more than double the July total, but this was still well below the -£660m monthly average since outflows began in earnest in September 2021.

Surprisingly, bond funds saw significant outflows during the month, totalling a net -£516m, the third worst month on record. This came despite a sharp fall in US bond yields as markets anticipated faster and steeper cuts in US interest rates. This pushed US bond prices up while the bond market remained broadly steady in Europe and the UK.

Elevated risk aversion meant safe-haven money-market funds were popular. Net purchases were £593m, the highest level since August 2023.

 

EP Resources selects Surecomp to automate documentary trade credit

Surecomp has announced that EP Resources has selected its RIVO solution to automate and enhance its documentary trade finance process. This strategic partnership underscores EP Resources’ commitment to leveraging technology to drive operational excellence and streamline risk management.

In today’s dynamic trading environment, the efficient management of trade and supply chain finance is critical for ensuring smooth operations and maintaining financial agility. By implementing RIVO, the Swiss-based firm will benefit from a fully automated, cloud-based solution designed to optimise liquidity and centralise the entire lifecycle of processing trade documents - from issuance and amendment to cancellation.

The RIVO platform is designed to have user-friendly interface, robust integration capabilities, and advanced analytics, providing scalable and reliable tools to manage complex trade credit portfolios. EP Resources hopes that the implementation will significantly reduce manual processes, mitigate risks associated with errors and delays, and gain real-time visibility into their workflows.

“A strategic decision to enhance our operational efficiency and improve our risk management framework, we are now able to streamline our trade finance management, enabling us to focus on our core business objectives and drive growth in an increasingly competitive market,” said Paul Deelstra, Head of Trade Finance for EP Resources. 

 

Mandatory central clearing to bring safer, more resilient treasury market, but at a cost

Experts from some of the US Treasury market’s most active and influential firms believe mandatory central clearing will result in a market that is safer and more resilient but will also make trading more expensive and potentially curtail trading volumes.

Since the rules were finalised by the SEC in December 2023, market participants have tried to predict the impact of the new regulations and debated the potential pros and cons for all sides. To better understand how market participants view the regulations as the implementation date approaches, Coalition Greenwich interviewed key practitioners from some of the market’s most important and influential firms, including four of the top five treasury dealers by revenue, the largest pension funds, asset managers and hedge funds in the world by assets, and some of the largest non-bank Treasury market liquidity providers.

These market participants largely agree on several key points. First, clearing will increase costs. The majority of respondents (over 70%) expect the cost of trading to rise due to new margin requirements and clearing fees. Second, approximately 85% of respondents believe increased margin costs could cause them to reduce their trading activity in the market and finally, clearing will, despite some potential negatives, improve market safety and resilience.

“Despite the expected increase in costs, the majority of respondents believe that clearing will make the market safer and more resilient in times of stress, reducing systemic risk and contagion risk,” said Kevin McPartland, Head of Research at Coalition Greenwich Market Structure & Technology and author of ‘The Impact of Treasury and Repo Clearing Mandates: The Industry View’. “This aligns with the SEC’s goal in implementing the clearing rule.”

Study participants believe the move to central clearing will not affect all market participants equally, with the researching should that dealers and trading venues are likely to benefit while hedge funds and non-bank liquidity providers may be negatively impacted. This could lead to a shift in market dynamics and potentially alter the competitive landscape.

“Market participants expect dealers and trading venues to come out as winners from central clearing, while hedge funds and non-bank liquidity providers may find a harder road ahead,” added McPartland.

 

Annual securities lending revenue down 12% in August

The global securities finance industry generated $831m in revenue for lenders in August 2024, according to DataLend, the market data service of fintech EquiLend. The figure represents a 12% decrease from the $945m generated in August 2023. Global broker-to-broker activity, where broker-dealers lend and borrow securities from each other, totalled an additional $221m in revenue in August, down 8% year-over-year.

The equity trends observed in July largely held true for August with US equity lending revenue declining 23% year-over-year. Average fees remained well below their 2023 levels with the US posting a 28% dip in borrow cost from the same period last year. Declining fees have been indicative of fewer securities trading “special” as market indexes continue to rise. In August, revenue generated from specials was down 30% compared to August 2023. 

Though equity revenues declined across global regions, Taiwanese stocks remained a bright spot in APAC, generating the second most revenue globally and a 44% increase year-over-year. In EMEA, the UK and France continued to perform well versus 2023, with revenue increases of 39% and 62% respectively.

Even with central bank rate cuts likely on the horizon in the US, sovereign debt lending continued to warm in August with a month-over-month average fee increase of 22% for US treasuries. Lending revenue for US government debt climbed 18% year-over-year.

Corporate debt continued to cool off with a 20% decline in global revenue year-over-year. The dip was largely driven by a 32% decline in U.S. investment-grade corporate lending revenue. 

 

Basware officially registered as PDP service provider in France

Accounts payable (AP) automation and invoice processing firm Basware has been officially registered as a Partner Dematerialization Platform (PDP) by the French Tax Authority General Directorate of Public Finance (DGFiP).

By 1 September, 2026, all businesses in France that are subject to VAT/TVA tax will be legally required to send and receive invoices electronically. The mandate aims to enhance transparency, reduce tax evasion, and improve efficiency in financial transactions. The French government estimates that this could recoup €3bn per year from businesses for incorrect tax claims.

To support the transition to e-invoicing, Basware helps enterprises automate their accounts payable processes by matching, approving and processing invoices at scale, ensuring that businesses can comply with new regulations while optimising their financial operations. 

As part of its commitment, Basware is a member of the PDP working group, set up by the French Tax Authority DGFIP, helping to implement the new mandate and support French businesses as they transition to e-invoicing. This transition poses significant changes for businesses in adapting their existing financial systems and processes. The PDP initiative is a platform that aims to provide support and solutions to ease this transition. 

“E-invoicing is no longer an option, it’s an obligation and a cost driver,” commented Markus Hornburg, SVP, Global Compliance, Basware. “However, many businesses are concerned about the complexity of compliance and the potential disruption to their operations. Businesses need a global service provider to help them remain compliant with evolving e-invoicing legislation and streamline their digitisation projects to deliver cost savings.” 

France joins a growing list of countries implementing mandatory e-invoicing. Each country will have its own specific requirements, timelines, and technical standards for e-invoicing. This creates a need for companies to stay informed about regulatory changes and adapt their processes accordingly. The European Commission says that the move to e-invoicing will help reduce VAT fraud by up to €11bn per year and bring down admin and compliance costs for EU businesses by over €4bn over the next ten years.