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Fund sales bounce back but investor fear remains

Fund sales bounce back but investor fear remains

UK retail investors continued to exhibit caution in August as a reversal of post-Brexit fortunes for funds predominantly benefited “safe haven” areas such as fixed income.

The Investment Association’s (IA) monthly statistics covering UK investor behaviour showed funds enjoyed net retail inflows of  £1.7bn – reversing a trend that saw £4.5bn of net outflows through June and July.

However, caution remained apparent with investors strongly preferring areas such as fixed income, while riskier assets had a more difficult time.

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Fixed income was the best-selling asset class, with net sales of £1.2bn, while mixed assets funds enjoyed net inflows of £412m. Money market vehicles took in £200m.

The Targeted Absolute Return once again proved the most popular peer group, with net retail sales of £480m.

However, equity funds fared less well, with overall net outflows of £629m – a figured significantly boosted by £405m of net sales into global equity vehicles. However, strategies focusing on specialist sectors, Europe and Japan struggled.

Property funds – many of which re-opened in September or will do so this month after gating immediately after the Referendum – enjoyed a modest net retail inflow of £1m.

IA Sector

Ranking inAug 2016

Net retail sales in Aug 2016

Ranking in July 2016

Net retail sales in July 2016  

Asset Class

Targeted Absolute Return

1

£480m

2

£490m

Other

Global 

2

£405m

3

£121m

Equity

Sterling Corporate Bond   

3

£379m

4

£349m

Fixed Income

Sterling Strategic Bond

4

£264m

9

£247m

Fixed Income

Global Bonds

5

£242m

1

£242m

Fixed Income

Source: Investment Association

In a normally subdued month for fund sales, August has added some relief to an industry which had seen £4bn leave in net outflows by the end of July. As both property and equity outflows clam, fixed income and absolute return strategies continue to grow in strength.

Alastair Wainwright, a fund market specialist at the trade body, noted that robust market movements had not entirely reassured investors who may have been spooked by the EU referendum outcome of June.

“Although markets have rallied due to looser monetary policy from the Bank of England and the weaker pound, UK investors remain cautious in their asset allocation decisions,” he said.

“The widely anticipated decision by the Bank of England to cut the bank rate to 0.25 per cent enticed investors to fixed income funds which benefited from lower bond yields.”