Europe and Japan funds hit by investor nervousness

Europe and Japan funds hit by investor nervousness

Net retail fund sales hit £1.2bn in April, the highest level this year, but continuing investor caution was underlined by outflows from two previously popular sectors.

The boost in sales, up from £921m in March, saw flows spread across a number of asset classes, but equity funds as a whole remained in net outflows as European and Japanese funds in particular suffered.

Revamped figures from the Investment Association (IA) – which now focus on UK-domiciled investors rather than simply UK-domiciled funds – showed the Targeted Absolute Return sector once again led the rankings with net sales of £742m.

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Fixed income was the most popular asset class, with overall net retail sales of £679m led by a strong showing in UK corporate and strategic bond funds. The figure was up from £360m in March.

Risk assets were again shunned, however. Equity fund sales remained in the red with net outflows of £635m. So far in 2016, equity funds have seen over £1.5bn leave.

April proved to be a dark month in particular for former sector favourites Europe ex UK and Japan. The pair saw £442m and £436m of net outflows respectively, sending flows year to date into negative territory for the first time.

The IA Global sector did see a rebound in sentiment, however, with net sales of £439m making it the second highest-selling sector in April.

The UK All Companies sector continued to struggle with net outflows of £669m, slightly down from March’s £818m but enough to push overall 2016 outflows past £2bn. The UK Equity Income sector remained popular with net retail sales of £342m.

Property funds also saw a jump in net outflows in April, to £137m. The redemptions came ahead of the price swings seen for four of the largest funds in the sector.

IA interim chief executive Guy Sears said the month’s figures were largely driven by the same trends seen in the first quarter of the year.

He added: “Following the slow start in January, the industry has now seen three consecutive months of strong net retail sales. This has mainly been driven by continued investor appetite for fixed income, tracker and absolute return funds.”