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Summer Investment Monitor - June 2014Investor sentiment steady for equities
Equity markets may have come off the boil in the first quarter of the year, in the wake of the emerging market sell-off and fears of a slowdown in the US, Japan and China, but investor sentiment remains steady.
Latest figures from the IMA for April 2014 show that equities continue to be the most popular asset class in general, with net retail sales of £1.4bn compared with just £270m into fixed income.
Bonds have in fact fallen out of favour so much that mixed-asset funds, funds of funds and even tracker vehicles have all proved more popular, with mixed-asset net retails sales of £511m almost double that of the fixed income sectors.
Within equities there remains a clear preference for developed markets with the largest proportion of equity net retail sales flowing into the UK at £644m, while Europe saw inflows of £285m.
Interestingly the US seems to be most out of favour with investors, with the region seeing net retail outflows of £19m in April, which follows outflows in every month so far in 2014, peaking with a loss of £290m in February.
The UK also dominates average net retail sales for the previous 12 months at £432m, closely followed by global equities at £304m and Europe at £172m. In contrast Asia has seen average net retail outflows of £41m for the past 12 months, highlighting the potential impact the emerging market sell-off may have had on investors in that region.
Another potentially surprising trend in the latest figures is the significant increase in interest in ethical funds. It is difficult to say whether this was driven by end-of-year Isa sales or the impact of initiatives such as the Climate Change week in March.
The data, however, show net retail inflows into ethical funds in April 2014 of £58m, the highest level since July 2007, and compares favourably to the £25m received a year earlier. In addition the March 2014 inflows were equally strong at £37m.
As a result ethical funds under management have now reached £9.2bn, which accounts for approximately 1.2 per cent of the total industry funds under management. The first four months of the year has seen net retail inflows of approximately £152m, which is equivalent to roughly 75 per cent of the total net retail inflows into these funds in 2013 of £207m.
This could mark the start of an interesting trend in the UK investor market, although if emerging markets should regain their footing in the second half of the year, it would not be surprising if they started to once again dominate investor inflows.
Nyree Stewart is features editor at Investment Adviser
