Sales on platforms surged in the final quarter but were still down for the year overall as political uncertainty put investors off making big decisions, according to Fundscape.
Net sales on platforms hit a record high of £10.5bn during the fourth quarter of last year, but this was not enough to offset a sluggish first three quarters of the year as annual net sales were down 16 per cent to £38bn.
Many investors expected markets to react more dramatically around political events, including Brexit and the election of Donald Trump as US president, than actually occurred.
Those investors who chose to wait out potentially volatile political events returned to the market in the fourth quarter, despite ongoing low returns, according to Bella Caridade-Ferreira, chief executive of Fundscape.
Ms Caridade-Farreira called business in the fourth quarter “a little patchy”, but said investors are showing signs of feeling much more bullish about the future.
“They’ve accepted that geopolitical uncertainty and low returns are here to stay, and life has to go on. A wall of cash has been building up over the year and that money is now starting to trickle in."
Ms Caridade-Farreira said that she expects 2017 “far better year” as long as there are no major events to further spook investors.
Barry O’Neill, investment director at Carbon Financial Planning, recommended against investors aiming to time the market by holding off on financial decisions until after political events.
“We tell clients that the best time to invest is when you have money,” Mr O’Neill said.
Cofunds, now part of Aegon, is the largest platform in the UK at £83.7bn, but Hargreaves Lansdown experienced the greatest asset growth at 19 per cent to £11.2bn.
Aegon’s ongoing migration of legacy assets on platform pushed its sales to £1.8bn during the fourth quarter, but over the course of the year it was tied with Hargreaves Lansdown for net sales at £5.6bn.
Transfers out of defined benefit (DB) pensions provided a boost for platforms as self-invested personal pension (Sipp) assets made up 30 per cent of total assets on platforms and 62 per cent of net sales last year.
Ms Caridade-Farreira said that the unprecedented interest in DB transfers has created a “long pipeline of business” that should continue to support the platform business.
Despite the popularity of passive funds in the larger investment market, only one passive fund, Vanguard Life Strategy 60 per cent, was in the top 10 most popular funds on platforms and accounted for only 6 per cent of total gross sales and 9 per cent of net sales.
Mr O’Neill said that the lack of passives on the list reflects their comparatively small proportion of market share, but said that this could likely pick up in the coming years.
“There has been a trend towards passive funds over the past few years but these funds still are only a small proportion of the European fund market.”
Neil Woodford’s Woodford Equity Income was the most popular fund by gross sales during 2016 while Fundsmith Equity, managed by Terry Smith, was most purchased by net sales.
julia.faurschou@ft.com
