The European equity fund market has shrunk by 46 per cent since the end of 2007, according to a market update from Fitch Ratings.

Assets under management (AUM) in the European equity fund market had fallen to €314.5bn at the end of September this year, which Fitch said reflects negative returns of -27 per cent and investor redemptions of €115.5bn.

Director in Fitch’s fund and asset manager rating group Charlotte Quiniou said the “exodus” from European equity has been fuelled by investors’ concerns over the eurozone sovereign crisis.

The report also identified a 28 per cent gap between the average annual fund performance of the top and bottom quartiles over five years. However, outperformance was not consistent over time.

"Almost 50 per cent of the pre-crisis best performing funds are now underperforming their peer group's median, and volatility coupled with structural economic changes have spoilt certain track-records," Quiniou said.

The report also notes that only 36 per cent of European equity funds managed to attract positive net flows over the past year.

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