5.9 billion euros inflow into Article 9 Funds

With inflows of €5.9 billion in the second quarter of 2022, Article 9 funds have become more popular than their Article 8 counterparts.

According to data from Morningstar, Article 8 funds experienced outflows of €30.3 billion during the same time frame.


The total value of funds used for Article 8 and 9 strategies fell by 6.4 percent over the course of the quarter to €4.18 trillion.


Under the EU's Sustainable Finance Disclosure Regulation, both categories have been in effect since March 2021. (SFDR).


Additionally, according to Morningstar, while assets for Article 6-aligned funds decreased by 8.9 percent over the second quarter of 2022, assets for Article 8 and Article 9 funds reached 50 percent of the SFDR-aligned market share.

With Morningstar estimating 183 and 9 launches of these respective categories in the quarter, Article 8 and 9 product development remained stable.


This represented more than half (60%) of all new funds started in the EU during the same time period.


Over the quarter, the SFDR status of an additional 700 funds changed.


The majority of the changes were upgrades from Article 6 to Article 8, even though there were 16 downgrades from Article 9 to Article 8.


This research, according to Morningstar, has highlighted how difficult this time has been for the sector: "because of data patchiness and a lack of direct comparability between products, financial advisers will struggle to fulfil their new obligations"


The Markets in Financial Instruments Directive II (MiFID II), which takes effect today, is one of these new requirements (2 August).


The directive mandates that when determining suitability, financial advisors take clients' preferences for sustainability into account. In light of this, advisors will need to make accommodations for clients who express a desire to make sustainable investments.


Additionally, clients can now select only investments that take into account principle adverse impacts (PAI).


However, Morningstar discovered that only 43% of Article 8 and 9 funds take PAI consideration into account.


"Investors should brace themselves for a confusing investment product landscape when the amended MiFID II goes live," Morningstar continued in its commentary.


"There is no doubt that financial advisers themselves will struggle to fulfil their new obligations. Many will have to teach themselves while they educate their clients about the new, complex, and growing landscape of sustainable investments."

By fLEXI tEAM