Investors turned towards fixed income funds to the tune of nearly £2bn in May as markets began to recover from the impact of the coronavirus pandemic.
Figures from the Investment Association, published today (July 2), show fixed income was the best-selling asset class in May 2020, with £1.9bn of net inflows.
In general, May was a strong month for flows as investors piled cash into retail funds, leaving property as the only asset class to experience net outflows, with £21m pulled from property portfolios.
Some £4.7bn was invested over the month, 370 per cent more than the £1bn of inflows measured for May last year.
Chris Cummings, the IA's chief executive, said: “It was steady as she goes for the fund market in May, as net retail sales continued their stable recovery after significant outflows in March.”
Tom Sparke, investment manager at GDIM, said: “Fixed income has been strong and the environment, with central banks buying enormous amounts of sovereign and investment grade bonds, is supportive of high quality credit.
“So it is understandable that [fixed income funds] are popular, especially with cash rates still so low.”
Active funds continued to stage their comeback, with £3.5bn placed into these funds over the month of May.
This was more than double the £1.3bn invested in their passive counterparts, a trend the market saw in April when similar figures were recorded.
Mr Sparke said investors were looking at the market and deciding they did not want “blanket exposure” to any particular region at the moment, which passive funds tend to offer.
He added: “There are growing dichotomies between sectors right now and services and leisure are still very challenged. This is a similar picture from some parts of manufacturing and energy too so I think many allocators will want to avoid adding to struggling industries.”
In terms of equities, global funds took the crown for the best-selling region in May, with net inflows of £740m.
North America was close behind with £715m of net inflows, while UK funds also saw positive flows as investors placed £422m into the currently struggling market.
Mr Sparke said: “There is a wealth of excellent global funds in the market right now and some of these have done very well over the course of this year.”
He also thought there had been a shift toward a preference for a more thematic and global approach in portfolios, away from more regional allocating.
All other equity regions saw net outflows. Some £25m, £110m and £500m were pulled from Japan, Asia and Europe funds respectively.
Responsible investment funds also saw inflows of £911m over May, meaning their overall share of the industry now stood at 2.5 per cent or £31bn.
imogen.tew@ft.com
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