UK investors turn to global funds in the lead up to the US election

Monday 28 November 2016

The Investment Association’s monthly statistics of UK investor behaviour in October 2016 show:

• Equity outflows continue as investors look to mixed asset, money market and fixed income funds
• Targeted Absolute Return top-selling sector with net retail sales of £426 million
• Global equity, Global Emerging Markets and Global Bonds sectors make up three of the top five selling sectors
• Total net retail fund sales of £595 million
• Funds under management increased by over £20 billion in October

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

“October saw the closing stages of the US election and the uncertainty surrounding the outcome led to cautious investing amongst UK investors. Net retail sales, however, were once again positive and industry funds under management increased further past the £1 trillion mark.”

Alastair Wainwright, Fund Market Specialist, said:

“Investor caution was once again evident in October as retail sales flows focused on traditionally less risky areas of the market. Net sales into retail money market funds reached a record monthly high for the second time this year as advisers allocated their clients’ money into cash.

“Targeted absolute return was once again the best-selling sector, however the remaining sectors in the top five had a global focus with Global equities, Global Emerging Markets and Global Bonds all featuring. This is a continuation of a trend we have seen all year as investors move away from country or strategy specific funds toward wider mandate funds, utilising fund managers’ asset allocation skill.

“Mixed asset funds continued to benefit from regular savers with another positive monthly net retail flow; risk targeted fund ranges were the major beneficiary followed by the 40-85% Shares and 0-35% Shares sectors.

“Tracker funds continue to be popular with a monthly net retail inflow of £233 million. Interestingly the flows for passive strategies mirror that of the active funds market. Equity tracker funds saw an outflow of £154 million, whereas fixed income and multi-asset tracker funds received net retail inflows of £190 million and £159 million respectively. Not only did passive sales echo active in terms of asset class but also in terms of equity region, with global tracker funds the only equity region to see positive flows.”

FUNDS UNDER MANAGEMENT AND NET SALES

ASSET CLASSES

Mixed Asset and Money Market were the joint best-selling asset class in October with net retail sales of £480 million.

Fixed income funds bounced back in October with net retail sales of £359 million, up by £274 million from last month.

Property and equity funds, however, both experienced net retail outflows of £276 million and £960 million respectively.

NET RETAIL SALES OF EQUITY FUNDS BY REGION*

Global was the only equity region to experience an inflow in October with net retail sales of £582 million.

Asian equity funds saw a small outflow of £39 million, whilst North American and Japanese equity funds experienced larger ourflows of £108 million and £146 million respectively.

We continued to see this year’s trend in European and UK equity fund sales in October, with investors pulling £367 million and £888 million out of each region during the month.

THE INVESTMENT ASSOCIATION SECTOR RANKINGS

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

• 1. Targeted Absolute Return was the best-selling sector with net retail sales of £426 million.
• 2. Global with net retail sales of £384 million.
• 3. Short Term Money Market with net retail sales of £320 million.
• 4. Global Emerging Markets with net retail sales of £223 million.
• 5. Global Bonds with net retail sales of £162 million.

The worst-selling Investment Association sector in October 2016 was the UK All Companies sector with a net retail outflow of £723 million.

RETAIL DISTRIBUTION

In October, gross retail sales for UK fund platforms totalled £8.2 billion, representing a market share of 47.4% (46.3% in October 2015).

Other Intermediaries including UK IFAs and Wealth Managers attracted gross retail sales of £4.0 billion, representing a market share of 23.1% (27.2% in October 2015).

Direct gross retail sales in October were £1.8 billion, representing a market share of 10.1% (7.3% in October 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 £32 million in October.

Personal Pensions had net sales of £250 million, Insurance Bonds (-£19 million), ISAs (-£66 million), and Unwrapped (-£133 million).

For the same five fund platforms, funds under management as at the end of October 2016 were £222 billion, compared with £197 billion a year earlier.

ISAs**

In October 2016, funds in ISAs provided by fund companies and the five fund platforms that feed data to The Investment Association (Cofunds, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) saw a net outflow of £395 million.

The top three best-selling sectors for ISAs based on the five fund platforms were:

• 1. Short Term Money Market (£49 million net sales)
• 2. Specialist (£38 million net sales)
• 3. Money Market (£20 million net sales)

FUND OF FUNDS

Funds of funds had a net retail outflow of £78 million in October 2016.

Funds of funds invested into the same firm’s funds saw net retail sales of £127 million, compared to a £205 million outflow from funds of funds that invest externally.

Funds under management for funds of funds were £121 billion at the end of October 2016, accounting for 11.7% of industry funds under management, compared with 11.3 % in October 2015.

Tracker funds saw a net retail inflow of £233 million with funds under management of £136 billion as at the end of October 2016. Their overall share of industry funds under management was 13.2%, compared with 11.3% in October 2015.

ETHICAL FUNDS

Net retail sales of ethical funds were £78 million in October 2016. Funds under management were £12.1 billion at the end of October, representing a 1.2% share of industry funds under management.

Alex Hogan
Press & Digital Media Officer
[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.