It's been a decade since the infamous turning point in the UK financial crisis. What has changed since then?
Thursday, Sept. 14 marked 10 years since the run on Northern Rock, which is widely regarded as a major turning point in the financial crisis in the UK.
Here, the Deals Intelligence and Lipper teams at Thomson Reuters take a look at the impact we’ve seen in the last 10 years in the UK merger & acqusition and bond funds spaces, respectively. Thomson Reuters Eikon data also provides a 10-year look at the performance of key currencies.
Even though 10 years have passed, M&A has not wholly rebounded to its pre-recession levels.
- Current YTD M&A volumes with any involvement from the UK amount to US$258 billion, representing 39.9 percent of pre-crisis levels.
- Inbound, outbound and domestic M&A volumes stand at 47 percent, 26.8 percent and 37.5 percent, respectively, when compared to 2007 year-to-date figures.
- Inbound M&A in 2015 was the only time since 2007 where M&A activity in the UK surpassed pre-crisis levels.
Bond Funds – Thomson Reuters Lipper
As we deal with ongoing central bank distortion and “lower for longer” interest rates, direct results of the Global Financial Crisis (GFC), Thomson Reuters Lipper reflects on the impact it had—and continues to have—on bond funds in the UK and Europe.
- By the end of 2007, bond funds in Europe and the UK (pan-Europe) suffered the highest net outflows of any asset class at €66.9 billion.
- By the end of 2008, bond funds in pan-Europe had hemorrhaged €433.4 billion of net outflows.
- It wasn’t until the end of 2014 that pan-Europe bond funds recouped the net outflows of ‘07/’08. (For the five years to the end of 2013 net inflows into bond funds were €483.8 billion).
- Performance-wise, pan-Europe bond funds have rebounded strongly in the last 10 years (the following figures are from Dec. 31, 2006, to June 30, 2017, in GBP). The Lipper Global Bond–GBP Corporates sector has returned 64.5 percent. The Lipper Global Bond–GBP Government sector has returned 77.4 percent.
- By comparison, Libor GBP one-year over the same period has returned 24.6 percent, and the Lipper Global Equity–UK Diversified sector has returned 83.3 percent.
- Recent returns are still buoyant, with 2.6 percent for the first half of 2017 in the Lipper Global Bond GBP Corporates sector.
- Bond funds have been pan-Europe’s top-selling asset class for three of the last five years.
- As of June 30, 2017, YTD net inflows of €161 billion suggest that in the absence of any major market shock, we could see the best year for the asset class in the ten years since the GFC.
- Bond fund managers may not be increasing credit risk to satisfy yield demands: In the flexible IA UK Strategic Bond sector the average BBB-rated exposure in 2007 was only 13.2 funds; today it is 26.6 percent.
- The popularity of bond ETFs in pan-Europe is evident. At the end of 2016 bond ETF flows were 17 percent of all bond flows. Five years ago this figure was 4 percent.
Key currency performance
Thomson Reuters Eikon data provides an interesting picture of the 10-year performance of key currencies.
British Pound – United States Dollar
Euro -United States Dollar
Euro – British Pound
Read the other pieces in our 10 years since the financial crisis coverage: