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Flows data suggests rush to active funds is on hold

December's flows data from Morningstar brought little in the way of good news for the big fund houses or for those who believe active funds are the way through the current turmoil.

But the month did bring forth an unwanted milestone for Baillie Gifford, as the gals and guys in Edinburgh reached outflows of more than £10bn for 2022. 

That total was nearly £4bn more than the next worst firm in terms of outflows, which was Aviva Investors at £6bn.

In December a further £576mn was pulled from Baillie Gifford funds, and there were net outflows in all 12 discrete months of the year. 

That leaves the firm's open-ended funds retail book at £39bn in size. 

In contrast BlackRock and Legal & General, both houses with sizable passive fund ranges, enjoyed a positive December, attracting net inflows of £577mn and £192mn respectively over the year. 

Legal & General had a strong 2022, with net inflows in total of £4.1bn.

Schroders had outflows of more than £2bn in 2022, but a positive December, with a net inflow of £75mn. 

In terms of where the flows have gone, the top five mandates to attract net flows in December were all passive instruments, with the HSBC American Index fund topping the charts with a net inflow of £221mn, taking its total for the year above the £1bn mark. The next most bought was also a US passive mandate, Vanguard US Equity Index, which had a monthly inflow of £206mn. 

It's a sign of how much market sentiment has shifted that a government bond tracker, arguably the least intuitive investment idea around for most of 2022, had a net inflow in December. It was the Abrdn Global Government Bond Tracker fund which brought in just over £200mn during the month. 

This fund is only owned by one DFM who uses it in their ESG range.

Trackers didn't have it all their own way though, as Vanguard's FTSE All Share fund had an outflow of £295mn in December and £2.4bn over the course of 2022 - though UK equity funds didn't have a fun year.

Perhaps surprisingly, this fund proved relatively popular last year with the allocators we cover, taking on a net of two new buyers and appearing in the portfolios of four DFMs.

Janus Henderson's Multi-Asset Credit fund had an outflow of £582mn in December to be the active fund with the highest outflow during the month. 

Many market participants took the view that the growth of passives coincided with the low interest rate world, and that as rates rose, so too would the need for active managers.

But the data seems to indicate that the turbulence of 2022 hasn’t helped active managers by as much as it might have done.

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