UK investors opting for fixed income over equities

Added 1st June 2016

The Investment Association’s retooled monthly statistics revealed fixed income was the asset class of choice among UK retail investors in April, while equity funds fell out of favour.

UK investors opting for fixed income over equities

Fixed income funds brought in the highest net retail sales of any asset class in April at £679m, helping to elevate overall net retail sales to over £1bn for the first time in 2016, the IA said.

Wednesday’s figures also highlighted UK investors’ aversion to equity funds, which many speculate has intensified in the lead up to the EU Referendum. They were the worst performing asset class of the month by the IA’s calculation, responsible for £635m in net retail outflows.   

By broadening the scope of its monthly report to reflect UK based investments in both domiciled and non-domiciled funds, the impact of the forthcoming Brexit vote on equity funds was even more acute.

Whereas global equity funds achieved the highest net retail sales of the category to the tune of £548m, UK equity funds experienced net outflows of £310m. Europe’s equity funds took an even bigger hit with net outflows of £507m, also hinting at the potential impact of Brexit anxieties.  

The IA report also revealed that tracker funds were in fashion with UK investors, drawing in £454m of net retail sales. With funds under management totalling £109.2bn, tracker funds now account for 10.7% of industry funds under management, a 1.1% increase between April 2016 and April 2015.

The IA’s Targeted Absolute Return sector was likewise a top performer in April 2016, generating net retail sales of £742m. The hotly debated UK Equity Income sector was the third best performer, bringing in net retail sales of £342m, nearly £100m less than IA’s Global sector which snagged second place.

IA interim chief executive, Guy Sears, summed this month’s findings up. "Following the slow start in January, the industry has now seen three consecutive months of stronger net retail sales,” he said. “This has mainly been driven by continued investor appetite for fixed income, tracker and absolute return funds."

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