Industry funds under management grew by 13% in 2016

Tuesday 31 January 2017

The Investment Association’s statistics of UK investor behaviour for 2016 show:

• Funds under management increased by £117 billion in 2016
• Net retail sales of £4.7 billion in 2016
• Targeted Absolute Return was the best-selling sector with net retail sales of £5.1 billion
• Tracker funds under management hit an all-time high of £141 billion
• It was also a record-breaking year for Money Market funds with net retail sales of £2.4 billion

Chris Cummings, Chief Executive of the Investment Association, said:

“Despite a slowdown in net retail sales in what was an extraordinary and challenging geo-political year, the UK asset management industry continued to grow strongly and provide value to investors, savers and pensioners across the world.

“Funds run by our members for UK investors grew by more than £100 billion in 2016, representing a significant contribution to people’s wealth and pensions, as well as the UK economy as a whole.”

Alastair Wainwright, Fund Market Specialist, said:

“Funds held by UK investors grew to a record £1,045 billion at the end of 2016, a 12.6% increase through the year. Fund performance contributed £104 billion of this growth, whilst net sales contributed £13 billion.

“Net retail sales ended the year on a high as retail investors allocated £2.7 billion to funds in December, this follows a £1.5 billion net retail inflow in November. Net retail sales totalled £4.7 billion in 2016 with fixed income and absolute return funds attracting the bulk of inflows. Despite global stock markets performing well over the year, retail investors sold out of equity funds. Property funds also suffered as advisers and wealth managers moved away from the sector.

“Targeted Absolute Return was once again the best-selling sector with advisers and discretionary wealth managers driving flows into those funds. Money Market funds also benefited from the regulated advice sector with assets growing by 40% in 2016 due to increased allocations to cash. The UK All Companies sector experienced the largest outflows but the sector’s funds under management grew over the year as UK equities performed well.

“Tracker funds under management grew by £36 billion in 2016 and they now account for 13.5% of the UK industry. Most of this increase is attributed to high market returns which contributed £31 billion to the growth of funds under management whilst net sales accounted for £5 billion.”

FUNDS UNDER MANAGEMENT AND NET SALES

ASSET CLASSES

Other was the best-selling asset class in 2016 with total net retail sales of £6.0 billion. The Other asset class category includes funds from the Targeted Absolute Return and Unclassified Sectors, which together contribute the overwhelming majority of net retail sales within the asset class. A large part of the Unclassified Sector is made up of risk-targeted and private funds.

Fixed Income was the second best-selling with net retail sales of £3.8 billion, after an outflow of £2.1 billion in 2015.

Mixed Asset was the third best-selling with net retail sales of £2.6 billion, down from £3.7 billion a year earlier.

Money Market funds saw record annual net retail sales of £2.4 billion in 2016, up from £704 million.

Property funds saw outflows of just under £2.0 billion in 2016, compared to a net retail inflow of £2.7 billion in 2015.

Equity funds saw a net retail outflow of £8.2 billion in 2016, compared to being the top-selling asset class a year earlier with net retail sales of £7.8 billion

NET RETAIL SALES OF EQUITY FUNDS BY REGION*

Global equity funds were the best-selling in 2016 with net retail sales of £2.6 billion, up from £940 million in 2015. All other equity regions experienced net retail outflows.

North American equity funds had a net retail outflow of £400 million in 2016, compared to a net retail inflow of £605 million a year earlier.

Japanese equity funds saw a net retail outflow of £912 million in 2016, down from £1.2 billion of positive sales in 2015.

Asian equity funds saw an outflow of £949 million in 2016, compared to a larger outflow of £1.0 billion in 2015.

European equity funds experienced a net retail outflow of £3.6 billion in 2016, compared to a £3.8 billion inflow a year earlier.

UK equity funds saw a net retail outflow of £4.9 billion in 2016, compared to an inflow of £1.9 billion in 2015.

THE INVESTMENT ASSOCIATION SECTOR RANKINGS

The top five best-selling Investment Association sectors in 2016 were:

• 1.Targeted Absolute Return with net retail sales of £5.1 billion.
• 2.Global with net retail sales of £2.5 billion.
• 3.Short Term Money Market with net retail sales of £1.8 billion.
• 4.£ Corporate Bond with net retail sales of £1.6 billion.
• 5.Mixed Investment 40-85% Shares with net retail sales of £1.1 billion.

The worst-selling Investment Association sector in 2016 was the UK All Companies sector with a net retail outflow of £5.4 billion.

RETAIL DISTRIBUTION

In 2016, gross retail sales for UK fund platforms totalled £87.4 billion, representing a market share of 47.4% (46.4% in 2015).

Other Intermediaries (including Wealth Managers, Stockbrokers, IFAs and Discretionary Fund Managers) attracted gross retail sales of £43.2 billion in 2016 representing a market share of 23.5% (23.5% in 2015).

Direct gross retail sales in 2016 were £15.5 billion, representing a market share of 8.4% (10.9% in 2015).

FUND PLATFORM PRODUCT SALES

For the five fund platforms that provide data to The Investment Association (Cofunds, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) we saw net retail sales of £4.0 billion in 2016.

Personal Pensions had the highest net sales at £4.3 billion, followed by ISAs (£1.2 billion), Insurance Bonds (-£234 million), and Unwrapped (-£1.3 billion).

For the same five fund platforms, funds under management as at the end of 2016 were £228 billion, compared with £200 billion a year earlier.

In 2016, net retail sales of funds in ISAs provided by fund companies and the five fund platforms that provide data to The Investment Association (Cofunds, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) were £1.5 billion, down from £2.6 billion in 2015.

FUND OF FUNDS

Net retail sales for funds of funds in 2016 were £1.8 billion.

Funds of funds that invested internally saw net retail sales of £1.3 billion, compared to net retail sales of £549 million for funds of funds that invested externally.

Funds under management for funds of funds were at £123 billion at the end of 2016, accounting for 11.8% of industry funds under management, compared with 11.4% at the end of 2015.

Tracker funds saw net retail sales of £4.9 billion in 2016 down from £6.7 billion in 2015. Tracker funds under management, however, stood at a record high of £141 billion at the end of 2016.

Their overall share of industry funds under management at the end of 2016 was 13.5%, compared with 11.3% at the end of 2015.

ETHICAL FUNDS

Net retail sales of ethical funds were £807 million in 2016, the highest on record. Funds under management were £12.4 billion at the end of 2016, representing a 1.2% share of industry funds under management.

Alex Hogan
Communications Manager
[email protected]
T +44 (0)20 7269 4620
M +44 (0)7508 724 066

To see a breakdown of the data referenced in this press release, please see all of the tables here.

The Investment Association's figures for fund sales cover retail and institutional sales in authorised unit trusts and open ended investment companies (OEICs) provided by our membership to UK investors. The figures do not include investment trusts and ETFs.

Each month small revisions to figures may have been made since the previous press release. This reflects additional information received by The Investment Association.

Net retail sales comprise total retail sales minus repurchases (including switches between funds), thus the figures can result in a negative figure or outflow.

The following Investment Association sectors have been grouped together to compile the figures for regional equity sales:

Direct Channels

Direct includes sales forces and tied agents, private clients and other direct to investor sales without intermediation.

** The Investment Association’s ISA figures are based on information collected from fund companies and five fund platforms (Cofunds, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) where they are the ISA provider. Fund business through other ISA providers such as wealth managers is not included. The Investment Association’s figures cover about three-quarters of the whole of the market for funds held in ISAs.

About the Investment Association:

• The Investment Association is the trade body that represents UK investment managers who manage over £5.7 trillion on behalf of clients
• Our purpose is to ensure investment managers are in the best possible position to:
• • Build people’s resilience to financial adversity
  • Help people achieve their financial aspirations
  • Enable people to maintain a decent standard of living as they grow older
  • Contribute to economic growth through the efficient allocation of capital
• The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
• The UK is the second largest investment management centre in the world, after the US and manages 37% of all assets managed in Europe.