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Fixed ideas

With yields north of 6 per cent even in companies that have little likelihood of defaulting, it is perhaps not surprising that the best-selling sector in the Investment Association universe in October was IA Corporate Bonds, which had net new money of £879mn.

Meanwhile the present extremely high levels of volatility haven’t been sufficient to tempt investors back into absolute return funds, from which investors withdrew £914mn.

The sector average return of negative 0.79 per cent is better than that achieved by many asset classes this year, including corporate bonds, but investors may be pondering what the point is of total return funds, which aim to deliver "positive returns in all market conditions", if they can’t ride out a year of epochal volatility.

Only three funds in the sector have delivered a return of more than zero in each of the past five years (including 2022 to date): Man GLG Alpha Select Alternative, Brook Absolute Return and Gam Star Global Rates.

The FTSE 100 has actually shone this year, being marginally in profit, but investors continue to desert the domestic market, with £502m pulled from funds within the IA UK All Companies sector during the month. 

The most popular UK equity fund among the allocators we cover is Liontrust Special Situations, which appears in 11 portfolios, with just one net sale this year. Lindsell Train is next most popular, appearing in 10 portfolios, and having picked up a couple of new purchasers in the second half of this year. 

But as we have mentioned previously, average allocations to UK equities among DFMs have been trending downwards for a while. It now sits at 15.5 per cent compared to 19 per cent when we started measuring this in 2018.

Overall both equity and fixed income funds saw outflows during the month, of £2.3bn and £335mn respectively. 

Overall, that represents about half the level of outflows seen in September. 

Tracker and responsible investing funds also had positive net inflows in the month, indicating that some trends remain capable of withstanding all sorts of market storms.

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