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Equities comeback gathers pace

Joanna Faith
Written By:
Joanna Faith

Investors are continuing to plough money into equities and turn their back on bonds, according to latest fund sales figures.

Over £700m went into equity funds in November, the highest figure since April 2011, when the asset class attracted £1.25bn, data from the Investment Management Association reveals.

Bonds fund sales were at their lowest level since October 2008, with investment grade bond funds seeing significant outflows.

Jason Hollands, managing director – business development & communications, at Bestinvest says:

“This is further evidence of improving investor confidence as a number of the policy uncertainties which have overshadowed markets over the last year slowly dissipate.

“The euro debt crisis is not over but the ECB has shown greater proactivity since last summer. China still has significant imbalances in its economy but the leadership transition has happened and fears of a hard landing are subsiding. And while the US has not reached a full resolution of the “fiscal cliff”, a settlement has been reached which avoids tax hikes for most Americans.

“It has been our view at Bestinvest for some time that equities offer considerably better value than fixed income and shares are also relatively attractive from a yield perspective. This combination of attractive valuations and yields with the partial or full resolution of a number of policy uncertainties underpins a more positive investment outlook for the medium term.

Equities began seeing significant inflows back in September, with net retail sales of £541m that month.

This was well above the average of £65m outflows over the previous 12 months, and the first time in the last 12 months any asset class surpassed fixed income.

The most popular sector within equities in November was UK Equity Income, with sales at their highest level since May 2007.

This sector attracted inflows of £221m in November, well above its monthly average of £47m over the past 12 months.

In contrast, fixed income sales were at their lowest level since October 2008, falling sharply to £43m. Corporate bonds were the worst selling sector in November with a net outflow of £172m.

As bonds continue to deliver meagre yields, investors are turning away from this traditional ‘safe haven’ asset class in search of better returns.