Passive funds dominate inflows

Passive funds dominate inflows

A hefty 80 per cent of the funds that experienced the highest inflows in the third quarter of the year were passive products, latest data has shown.

Research from Morningstar, published yesterday (October 23), showed out of the 10 funds that received the highest net inflows in the three months to September 30, eight were passive funds.

The ASI Global Corporate Bond Tracker fund saw the highest net inflows at an estimated £794m, followed closely by Vanguard’s FTSE UK All Share Index and the AI US Equity Index funds — with £599m and £568m respectively.

                                             Top 10 funds for net inflows in Q3
Fund:P/A:Quarterly net inflows (£m):AUM (£m):
ASI Global Corporate Bond TrackerPassive7943,402
Vanguard FTSE UK All Share Index UTPassive5999,781
AI US Equity IndexPassive5681,674
Blackrock ACS World Low Carb Eq TrackerPassive517909
PUTM Bothwell Global BondActive431572
AI Non-Gilt Bond Up to 5 Years IndexPassive350979
AI North American Equity IndexPassive3388,488
Vanguard FTSE Dev World IndexPassive3376,609
Blackrock European DynamicActive3083,432
iShares Overseas Corp Bd IndexPassive2752,237

Overall a mere 16 per cent of the assets plunged into the top 10 funds in the period went to actively managed products.

Passive funds have become more popular over the years and most recently Vanguard’s index funds topped both the Fundsnetwork and Interactive Investor platforms’ best selling fund lists.

Paul Stocks, financial services director at Dobson & Hodge, said: “It would appear more and more businesses are using passive funds to keep investment costs low once advice fees are factored into the total cost to invest.

“But personally, I don’t see why advice and planning fees should correlate with the use of passive funds as it’s two separate aspects to the service being delivered. However, anecdotally, it would appear that they do.”

Mr Stocks thought there was a place for both strategies but that active strategies offered “additional diversification” which could be important when clients started to pull funds from their pension pot in retirement so were less able to rely on investment markets.

Patrick Connolly, chartered financial planner at Chase de Vere, said the inflows into passive funds were increasing every month in a trend which was “set to continue” as more investors became disillusioned with paying the higher costs of actively managed funds.

He also thought the debacle surrounding former-star fund manager Neil Woodford, who actively managed funds, could lead to more investors giving up on active managers and opting for a passive approach.

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