Investors poured over £2bn into bond funds in the various Investment Association (IA) sectors in November.
The IA Strategic Bond sector was the best selling, with £1.5bn of new money going into the sector, according to the IA.
Minesh Patel, an adviser at EAF Solutions in London, said he preferred strategic bond funds in the current climate as they have the flexibility to invest across a wide range of the bond market, which he feels is attractive in the current climate of economic uncertainty.
The best selling fund sector in the equity space was Europe, with net retail sales of £348m, more than twice the average of retail interest in that asset class, according to the IA.
Investors continued to pull cash out of UK assets in November, with £188m leaving IA sectors focused on UK equities.
Alastair Wainwright, fund sector specialist at the Investment Association, said: "For the sixth month in a row, fixed income was the best-selling asset class with net retail sales of over £2bn.
"The Sterling Strategic Bond sector remained the best-selling sector with £1.5bn of new retail money."
| Worst-selling Investment Association Sector | Ranking in November 2017 | Net retail sales in November 2017 | Ranking in October 2017 | Net retail sales in October 2017 | Asset Class |
| | | |
| £ Strategic Bond | 1 | £1.5 billion | 1 | £1.6 billion | Fixed Income |
| Mixed Investment 20-60% Shares | 2 | £305 million | 8 | £177 million | Mixed Asset |
| Europe excluding UK | 3 | £291 million | 9 | £171 million | Equity |
| Mixed Investment 40-85% Shares | 4 | £255 million | 5 | £224 million | Mixed Asset |
| Global | 5 | £205 million | 3 | £345 million | Equity |
Mixed asset was the second best-selling asset class with £1.2bn of net retail sales and within that the Mixed Investment 20 to 60 per cent Shares sector took in £305m.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "It is hard to fathom why bond funds have gained such popularity at a time of rising inflation and tightening monetary policy, both of which make wringing returns out of an already fully-priced fixed income market look like an uphill struggle.
"Bonds do provide some diversification to a portfolio in case things don't go as swimmingly as planned, after all, monetary policy can go in both directions, even at these low levels.
"Perhaps therein lies the rub - there is a great deal of negativity towards the UK, as evidenced by continued withdrawals from UK equity funds.
"This pessimism may well be manifesting itself in bigger bond inflows, as investors seek to protect against some of the risk that they see emanating from the Brexit negotiations and a weak government."
david.thorpe@ft.com
