Record breaking month for fund sales, but investors dump the UK
September was a record breaking month for fund sales and with three months left to go, 2017 is already the best-selling year since the Investment Association began records.
Net retail sales totalled £5.6bn in September, bringing the total fund sales for the first nine months of 2017 to £33.7bn.
The Investment Association’s (IA) monthly statistics also revealed that Q3 was the highest selling quarter on record with net retail sales of £14bn. This was closely followed by the previous quarter in 2017, which saw inflows of £12.1bn.
IA confirmed six of the highest selling months have all occurred in 2017. Industry funds under management were £1.2trn.
Which areas attracted investor money?
The best-selling asset class in Q3 was Fixed Income with net retail sales of £4.9bn. A large part was driven by the £ Strategic Bond sector (£2.3bn). In September alone, Fixed income drew sales of £1.8bn – the largest monthly inflow into the asset class on record.
Equity came second, with fund sales of £3.4bn (£1.4bn for September) while Mixed Asset was the third best-selling asset class with net retail sales of £1.1bn. However, Property funds saw outflows of £6m.
The best-selling sector was Global with sales totalling £1.5bn in Q3 (£534m in September), followed by Europe ex UK with £1.3bn (£518m in September). Japanese funds were the third best-selling with net retail sales of £191 million in the month.
The five best-selling Investment Association sectors for September 2017 were:
- £ Strategic Bond was the best-selling sector with net retail sales of £985 million.
- Global with net retail sales of £534 million.
- Europe Ex UK with net retail sales of £489 million.
- Volatility Managed with net retail sales of £471 million.
- Targeted Absolute Return with net retail sales of £273 million.
The worst-selling Investment Association sector in September 2017 was the UK All Companies sector with an outflow of £111m.
Bullish data but investors are cautious
Jason Hollands, managing director, business, development and communications at Tilney Investment Management Services Ltd, said the data looks “bullish” but with record inflows into the Fixed Income sector, it shows investors are cautious.
“Also notable, is that among equity sectors, retail investors have continued to shun funds invested in UK listed companies in favour of Global and European funds. In stark contrast, UK fund sales were negative, with £103 million dumped during the month, continuing a consistent pattern across the year. This is despite the healthy >17% returns on UK equities over the last year.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said it has been a bumper year for fund sales across the industry, after a very disappointing 2016, which suggests investors are returning in large numbers.
“Sales of UK equity funds have been abysmal in 2017, continuing last year’s trend, which suggests a high level of pessimism towards the domestic stock market. No doubt the malaise affecting UK fund sales is in large part Brexit-related. Almost half of the population voted to remain in the EU, and it’s natural to expect a large portion of this group to be bracing for an economic downturn in the UK. However while the Brexit negotiations continue to go from pillar to post, the UK economy has actually held up rather well, to such an extent the Bank of England has seen fit to raise interest rates for the first time in over a decade.”