InvestmentsAug 5 2021

Fund inflows reach highest level in four years

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Fund inflows reach highest level in four years
Chris Ratcliffe/Bloomberg

Fund inflows during the first half of the year reached their highest level since 2017 and are on track to set a new record.

According to the Investment Association, total net retail sales in the six months to the end of June were £24bn.

The UK was the only region that experienced outflows, with net retail outflows of £77m.

Outside the UK it was a strong month for equity funds, which saw net inflows double to £2.2bn, primarily into Global and European funds which saw £1bn and £247m of net inflows respectively.

Chris Cummings, chief executive of the IA, said: “The positive inflows for the first half of the year are a clear sign of the strong economic recovery and growing investor confidence as we emerge from the pandemic. 

“If the pace of net sales continues at the same rate, we could be on track to match the record-breaking inflows of 2017."

June was a record month for responsible investment funds, which saw more than £1bn of inflows and a total of £4bn in the second quarter - the highest quarterly inflows for the sector since IA data was first collected.

Laith Khalaf, head of investment analysis at AJ Bell, pointed to the success of the Covid-19 vaccines in giving investors confidence.

"This is probably also an after-effect of the massive build up of consumer bank balances in 2020 as lockdowns curtailed spending, and the fact that cash is still yielding next to nothing, with inflation on the rise," he said.

“Indeed it’s notable that global inflation linked bond funds saw significant inflows in June as investors positioned themselves for the possibility of an inflationary period. Responsible fund sales also continue to swell, and this looks to be a trend that still has plenty of renewable fuel in the tank."

Khalaf added: “In the equity space, global funds continue to dominate proceedings, while the UK was the only region to see outflows. The chancellor and prime minister this morning proposed an ‘investment big bang’ to get UK money flowing into private UK companies. But judging by these figures, investors still can’t be tempted into fully listed UK stocks, let alone higher risk and lower profile unquoted companies.”

Cumming added that investors are also showing inflation concerns, which may have a greater impact in the second half of the year.

“Investors looking for lower cost ways to save have continued to put their money into tracker funds. The difference in the data has been steady sales to active funds following March 2020’s outflow, helping flows to reach a record H1 total,” he said.

Most popular IA sectors by net retail sales during June 2021
Mixed Investment 40-85% Shares£910m
Volatility Managed£363m
Global Inflation Linked Bond£214m
Europe ex UK£212m

Tracker funds saw £2.2bn in inflows, compared with £1.5bn in May and just above the £2.1bn invested in June 2020.