UK retail investors returned to equity funds in the aftermath of Donald Trump’s election victory as the asset class enjoyed its first net inflows of 2016 in November, new figures show.
Having suffered £9.3bn in net outflows in the first ten months of 2016, equity funds took in £583m in November amid a stock rally fuelled by the belief that Mr Trump's policies could spark higher inflation in the US and beyond.
North American funds were a particular beneficiary, taking in £168m. This was the highest figure since March 2015, according to the Investment Association (IA).
But with bonds selling off on inflation fears, fixed income funds suffered £202m in outflows - the first net redemptions since February 2016. Sterling corporate bond funds were the biggest victim, shedding a net £166m.
Net inflows into funds of all types totalled £1.5bn in the month – making it the second highest month in 2016 for sales – with mixed asset funds also reaping the rewards of the shift in investor sentiment. The asset class' £606m in net flows was the highest since July 2015.
One trend which remained constant was a continued shift towards passive funds. A total of £1.2bn in net flows for tracker funds was the highest since June 2013 and the second largest on record.
In the equity space, other winners included UK All Companies funds, which took in £61m in November to end a 10-month losing streak which saw them shed more than £5bn in assets, and Japanese portfolios. Japan funds took in a net £108m, the first positive flows since February.
Chris Cummings, chief executive of the IA, said: “UK investors were tempted back into equity funds in November. The long period of uncertainty global markets have faced through the US election cycle also came to end with Donald Trump's unexpected win."
In accordance with the trend seen over the year as a whole, the Targeted Absolute Return grouping was the strongest performing IA sector with £542m of net sales – taking inflows to £5.5bn for the first 11 months of 2016.
It was followed by Global funds, which accrued a net £220m, and th equity-focused Mixed Investment 40-85% Shares sector's £183m in net sales.
However, the Europe ex-UK and Asia Pacific ex-Japan sectors each saw net outflows in excess of £100m, continuing the downbeat trend of recent months.
Investment Association Sector | Ranking inNov 2016 | Net retail sales in Nov 2016 | Ranking in Oct 2016 | Net retail sales in Oct 2016 | Asset Class |
Targeted Absolute Return | 1 | £366m | 1 | £426m | Other |
Global | 2 | £220m | 2 | £391m | Equity |
Mixed Investment 40-85% Shares | 3 | £183m | 8 | £111m | Mixed Asset |
North America | 4 | £168m | 34 | -£224m | Equity |
Mixed Investment 0-35% Shares | 5 | £155m | 9 | £94m | Mixed Asset |
