UK investors’ preference for equity funds this year has made them an anomaly among European portfolio buyers, analysis of Europe-wide 2015 sales figures shows.
Data from Lipper has found that equity fund sales accounted for just 11 per cent of total European flows in the first nine months, a sharp drop on last year’s figures.
This compares with Investment Association statistics that show equity funds have accounted for 42 per cent of net flows domestically this year, with income funds the main contributor.
UK Equity Income accounted for 40 per cent of total inflows across all asset classes for the UK market in September, according to the trade body. The category has been the best-selling sector in eight of the last 13 months.
Lipper head of research, Europe, Middle East and Africa, Detlef Glow said the same trend was apparent across Europe, but it had not translated into strong flows for equity funds as a whole.
Total equity fund sales had fallen by almost 50 per cent this year, Lipper noted.
“It is a little bit surprising that equity flows are so weak, but it is understandable why the numbers are going in this direction,” he said.
Lipper’s European data showed mixed-asset fund sales were the highest at 31 per cent of €300bn in total sales at September 30, followed by alternatives and bond funds at 25 and 23 per cent respectively.
Mr Glow said an aversion to equities and the hunt for alternative sources of income were behind these figures.
He added that multi-asset was on track to finish the year as the best-selling asset class for the first time in his 23-year career.
Lipper has noticed investors shifting capital away from equity products into multi-asset funds as a result of the market drawdowns seen this year.
“The question is whether this is good or bad. A lot of assets in multi-asset funds are linked to the bond market and there might be a negative surprise with any kind of hike in interest rates,” Mr Glow said.
“Alternatives are also one of the big surprises. They had a big year in 2013 after the eurozone crisis, but last year nothing happened.”
“They are gathering attention because we have seen so much need for income and alternative sources of income.
However, Lipper’s figures showed that in spite of the popularity for multi-asset vehicles and alternatives, global bond funds represented the most favoured sub-sector this year.
Mr Glow said sales of these funds stemmed from investors looking for an unconstrained approach to fixed income, but sterling corporate bond funds were among the least popular.
The data also demonstrated the growing desire for European equities ahead of US exposure. Equity funds from across the Atlantic were the worst-selling vehicles in 2015, with European equity the third most popular.
Mr Glow noted this was a reverse of 2014 when US equities were the top seller, particularly in the fourth quarter.
He said: “In Europe there are higher cash dividends and income streams than in the US. [Positive sentiment] is raising the value of stocks and then there is a higher cash dividend.”
