Passive products are prowling the active landscape

In June, its Targeted Absolute Return was the best-selling sector, notching up net retail sales of £445m, while mixed asset funds recorded their highest net retail sales since last summer at £404m.

Investors are always being advised to diversify their portfolios across asset classes by advisers and fund managers, and it seems the recent volatility in global markets has prompted investors to heed such advice.

Multi-asset funds are proving particularly popular, justifying the recent spate of launches in this space. Although old habits die hard, it would seem, with UK retail investors unable to resist that firm favourite, UK Equity Income, which was the second best-selling sector during the month, just behind Targeted Absolute Return, with net retail sales of £438m.

Could the real story be that investors are moving away from active management altogether? Ellie Duncan

That may explain why fixed income funds suffered net retail outflows for the second consecutive month, as investors chose not to leave themselves exposed to an asset class that has been acting up at the prospect of rising interest rates in the US and UK.

The short-term noise in global markets saw investors rotate out of fixed income and into equities in June, with equity funds managing an impressive £874m of net retail sales in the month. Naturally, UK investors gravitated towards UK equity funds, which the Investment Association reported had net retail sales of £491m.

The uncertainty in the Chinese stockmarket is sure to be behind the £288m outflows in retail sales of Asian equity funds.

While Mr Godfrey rightly points out that investors are leaving many of their investment decisions to managers in this torrid environment, tucked away in the Investment Association’s press release is a figure that points to another emerging trend.

Tracker funds, a form of passive investing, recorded net retail sales of £727m, taking funds under management to a whopping £104.3bn at the end of June. According to the Investment Association, that equates to a 12.1 per cent overall share of industry funds under management, up from 10.4 per cent in June last year.

Recent figures from research and consultancy firm ETFGI point out that exchange-traded funds now hold more assets under management than hedge funds globally. Many asset management firms have blamed global volatility for some of this underperformance or outflows in their industry.

But could the real story here be that investors are moving away from active management altogether as market uncertainty forces nervous investors into passive-type products.

Ellie Duncan is deputy features editor of Investment Adviser