Investors not willing to part with defensive assets post-Brexit

Added 3rd October 2016

The Investment Association’s August fund sales data showed investors still proceeding with caution after the Brexit vote, favouring fixed income and absolute return strategies.

Investors not willing to part with defensive assets post-Brexit

August marked investors' triumphant return to markets after pulling out in droves throughout July - total funds under management reached a record high £1trn.

Net retail sales over the month were £1.7bn, more than double the £816m generated the year before and practically reversing the Brexit-related outflows of the past few months.

Fixed income remained the asset class of choice for investors by some distance, generating £1.2bn in net sales. The next best asset type, mixed asset funds, only roped in £412m, though it was the highest monthly inflow it had seen in the past year.

“Although markets have rallied due to looser monetary policy from the Bank of England and the weaker pound, UK investors remain cautious in their asset allocation decisions,” said IA market specialist Alastair Wainwright.

"The widely anticipated decision by the Bank of England to cut the bank rate to 0.25% enticed investors to fixed income funds which benefited from lower bond yields.” 

The Targeted Absolute Return sector held onto its title of best-selling sector for the eighth month this year, surpassing the top sector in July, Global Bonds, as the most preferred sector among investors. Absolute return strategies attracted £480m in net retail sales, the IA said.

With £405m in net retail sales, the IA’s Global sector proved the second most popular over the month.

And according to the IA’s regional breakdown, global equities was the only category not to suffer outflows in August.

Global equities accounted for £189m in inflows compared with European equities which haemorrhaged £297m and UK equities which lost £162m.

The Specialist sector populated by emerging markets funds experienced the highest number of redemptions by sector, losing £247m.  

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