Investors shy away from absolute return in February

The IA Targeted Absolute Return sector, which was the highest net retail sales sector in 10 of the last 12 months, fell to fifth place with just £129m of net inflows.

The sector was dominant in January, taking in £297m against a backdrop of subdued investor activity elsewhere. However in February investors turned to different vehicles in the fixed income and multi-asset spaces.

The Mixed Investment 40%-85% Shares group enjoyed net inflows of £303m, making it the best-selling sector. Mixed Investment 20%-60% Shares similarly saw £164m of net sales.

This was followed by continued strong interest in fixed income funds despite uncertainty over the direction of rates. The Sterling Strategic Bond sector brought in £228m, and High Yield £148m of net sales - the first time since July 2013 the latter was a top-five selling sector.

The popularity of riskier, high yield bond products aside, these choices suggest a remaining sense of caution among many investors, with both strategic bond funds and multi-asset offerings having the ability to exploit a wide and diverse universe in times of difficulty.

"Once again our data shows the value that UK investors place on professional asset allocation skills during challenging economic times," said IA fund market specialist Alastair Wainwright.

"Strategic bond funds have a mandate to invest across the spectrum of fixed income securities, and the strong sales for these products illustrate UK consumers are looking to professional investors to navigate fixed income markets on their behalf."

Similarly, investor trepidation and the frothy nature of some developed markets may explain investor skittishness around equities. According to the Investment Association (IA) figures some £7.4bn went into equity funds on a gross basis but "near equivalent outflows" resulted in net retail sales of just £1m.

As has become common in recent months, bearish sentiment was most felt on UK equity funds, with the All Companies sector seeing £220m of net redemptions and Equity Income £174m - the two worst selling groups.

More broadly investors appeared happier to deploy cash in February. Net retail sales for the month were £2.2bn, marking a significant increase from January's £371m.

Property funds, which have been under scrutiny since their post-EU referendum woes last year, experienced a net retail outflow of £67m.

Any worsening sentiment on IA Targeted Absolute Return products may be spurred by weak performance from a number of flagship products in the group.

Last year, Investment Adviser reported that several of the group's members were among the top 10 worst-performing funds of 2016, prompting scrutiny of these funds.