Was 2017 really a banner year for fund flows?

The flows appear relatively complementary: Vanguard’s popularity has been based on its equity funds, while BlackRock has had particular interest in its iShares fixed income products. Its corporate bond and index-linked gilt trackers took in more than £3bn between them. 

L&G’s flows, meanwhile, were spread across a number of products and asset classes.

The table topper, however, is a company that focuses solely on active management: M&G. This represents a change of fortunes for the firm, which previously suffered two years of sizeable outflows. The driver of this change is the year’s single most popular fund: Richard Woolnough’s Optimal Income. Having seen £10bn in outflows between 2015 and 2016, the portfolio harnessed investor interest in flexible fixed income offerings in 2017 with an estimated £4.4bn of net new money in the first 10 months of the year.

Feeling flexible

Indeed, the overriding focus of those in the top 10 has been flexibility. Jupiter, like M&G, owes much of its success to its strategic bond fund. 

Aviva and Invesco Perpetual have continued to reap the rewards of the slump in interest in the Standard Life Investments (SLI) Global Absolute Return Strategies (Gars) fund. Their own multi-asset absolute return funds have taken in several billions this year, though the rate has started to slow in recent months.

Gars’ struggles mean that SLI is the worst performer in Table 2. Take it away, and the company would have enjoyed a small net inflow over the period. The picture is better still once Table 3 – detailing the multi-manager and fund of fund highlights – is factored in. The company’s MyFolio range has taken in more than £1bn this year.

For the purpose of this analysis, Standard Life and Aberdeen have been kept separate, and the latter also takes its place in Table 2, courtesy of its emerging market struggles. Three of those listed in the table take their place as a result of legacy outflows. 

Scottish Widows, Phoenix Group and Hbos are unlikely to feature on any intermediary’s list of providers to watch, and the redemptions seen here could indicate both the age of their existing business and the fact that charges for a number of their tracker products remain far in excess of peers’ fees.

Perhaps the most surprising name in Table 2 – and also contained inTable 5 – is First State. As with SLI, the firm’s outflows stem from a single fund, in this case Stewart Investors Asia Pacific Leaders. The portfolio has posted a return of 4.4 per cent over the past year compared with a 17.4 per cent jump for its benchmark.

The fund’s defensive qualities, which only become apparent when Asian stocks start to struggle, appear to be out of favour at a time when Asian indices are soaring. The retirement of longstanding manager Angus Tulloch last year may also have had an impact.