UK investors back best-of-British companies in December

The IA’s latest fund statistics for December 2019 reveal that UK investors were starting to feel more love for UK equities, buoyed by the significant Conservative party majority following the general election and Boris Johnson’s clear message on exiting the EU.

Whether a new economic dawn post Brexit materialises or not, investors were backing funds investing in the best-of-British companies.

The UK Smaller Companies and UK Equity Income sectors saw inflows of £507 million combined. UK All Companies was the best selling IA sector for the first time since March 2017 at £772 million. Overall, inflows to retail funds were strong in December reaching £3.6 billion, the highest in nearly two years.

There is good news too for active fund managers after a tough sales climate in 2019: flows to active funds were healthy in December attracting £1.7 billion in net sales. The last time sales to active funds reached this level was April 2018’s inflows of £2.2 billion.

Higher flows to active funds were not, however, at the expense of sales to funds tracking indices: tracker funds extended their strong run of sales, amassing £2 billion over the month.

December brings a year’s worth of data to analyse. One of the standout 2019 stats is the dominance of tracker inflows, as total net sales to trackers reached a remarkable £18.1 billion in 2019. This is an increase of £7.3 billion on the last record year of sales to trackers in 2017 (£10.8 billion) and significantly outpaces the £3.2 billion in outflows from active funds in 2019.

Global stock markets started to climb in June, with capital returns accelerating in the last three months of 2019.

Many investors chose to gain exposure to these markets through lower cost tracker funds: 50 percent of tracker inflows went to equity trackers in 2019. After a bruising year for some, active managers will be hoping that they can capitalise on this sales momentum in 2020.

A volatile start to the year for global equity markets, as coronavirus disrupts global supply chains, could put the brakes on a run of strong capital returns. Jittery markets could have a negative impact on equity tracker flows and highlight the stock picking strengths of the skilled active manager. Let’s wait and see.

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