That said, legacy money is typically fairly difficult to shift, as Table 4 hints. In a year of volatility, of increased pressure on fees, and an ongoing shift away from multi-manager portfolios, traditional fund of funds products may have been expected to struggle. But while six of the 10 names in the table are the same as last year, net outflows in all but one case are lower than they were in 2017. It may be that there simply isn’t much “active” money left to come out of these products.
Table 4: Bottom 10 fund groups by 2018 FoF flows
Estimated net flow, year to date (£m)
2017 netflow (£m)
Total relevant assets (£bn)
Notes: UK-domiciled funds only. 2018 data to October 31. Source: Morningstar. Copyright: Money Management
The leaders at the top of Table 3, meanwhile, also have a familiar look to them. Vanguard, Quilter (previously Old Mutual) and Standard Life have again seen considerable amounts flow into their LifeStrategy, Cirilium and MyFolio ranges, respectively. Investors might have fallen out of love with older multi-manager products, but their interest in more competitively priced, risk-rated solutions continues unabated.
Also of note here is the emergence of discretionary wealth managers Heartwood and Close Brothers. Their inflow figures may be relatively meagre, but the statistics only account for unitised offerings rather than model portfolios, and suggest the desire to outsource – one way or another – remains strong.
An eye on the future
Looking ahead, the new year is once more presenting uncertainties for asset allocators. They will again ponder whether certain asset class valuations are still too high for comfort, but 2019 brings an added complication.
In short, intermediaries and other fund selectors may be caught between two poles. As Mark Tinker, head of Asian equities at Axa Framlington, says: “All the winning trades in the first half of the year appear to have unwound, while few of the losing ones have recovered.”
This, he says, means “2018 looks set to go down as a year in which nothing worked”.
Mr Tinker adds: “A year of deleveraging has unwound many of the winning trades of the past three years over the past six months. While not repeating the stress of 2008 or even 1998 (Long Term Capital Management), we do feel like 2019 will start in a similar way to 1999 and 2009: the narrative is terrible, risks are everywhere and all are gloomy. Yet both years ran well from the end of the first quarter.
“As quantitative easing unwinds yet further, a back-to-basics approach focused on sound balance sheets, strong cash flow and active management looks sensible.”