This year could be the biggest on record for retail fund sales, as UK investors pumped £5.3bn into the funds in August, the first time fund flows have exceeded £5bn in that month.
Data from the Investment Association showed the net retail sales were up on July’s inflows of £4.8bn and marked a sharp rise on the £2bn invested in August last year.
Based on current trends, retail fund sales are on track to beat the £49bn raised in 2017, the current record.
Investors channelled £14.5bn into funds from June to August, meaning so far this year £34.2bn has been invested, or an average of £4.3bn a month. This would take annual sales to over £51bn if flows continue apace.
Laith Khalaf, head of investment analysis at AJ Bell, said: "2021 is on course to be a record-breaking year for retail fund sales and is set to just beat the £49bn raised in 2017 on current trends.
"The summer is traditionally a quiet time for markets, but retail investors didn’t pause for breath.
"There is still a substantial portion of the year left to go, and fund sales could fizzle out, particularly if markets take a tumble. But even if it fails to break records, 2021 will still be a very big year for flows into retail investment funds."
He said funds were proving popular because interest rates on cash are low and many people managed to save up money during the lockdowns.
"The threat of inflation also looms over the economy and private investors can buy some long-term protection from price rises by investing in equities," he added.
"Tax rises are coming too, which encourages savers to invest money in tax shelters like Isas and Sipps, again boosting fund sales.
"It also helps that markets have kept on melting up, particularly in the US, and [fear of missing out] is likely behind some investment decisions."
Responsible investing
Responsible investment funds saw net retail inflows of £1.33bn in August, down slightly on the £1.38bn seen in July.
Funds under management stood at £85bn as of the end of July. Their overall share of industry funds under management was 5.4 per cent.
Chris Cummings, chief executive of the Investment Association, said UK investors are maintaining their commitment to deploying their capital for environmental and social good as well as seeking a financial return.
He added: “In the run-up to the COP 26 climate conference in Glasgow, and as the UK government commits to generating 100 per cent of electricity from renewables by 2035, investors can play an important role in helping to support the transition to net zero.”
However, Khalaf warned investors should do some extra homework when choosing sustainable funds due to the range of different approaches on offer.
“[There are a] variety of approaches to ethical investing, with some funds simply tilting away from the worst ESG offenders, others entirely excluding them, and some funds actually seeking out companies having a positive impact on environmental and social issues,” he said.
“Ethical investing comes with a wide variety of interpretations, both from investors and fund groups, and the key is for investors to select funds whose investment policies marry up with their own ESG principles."
UK equity
Meanwhile UK equity funds had a decidedly worse month, with UK investors withdrawing £445m from the assets, compared with inflows of £259m in July.
Funds in the UK All Companies sector saw £354m of net outflows in August, representing the worst selling IA sector in the month.
Emma Wall, head of investment analysis at Hargreaves Lansdown, said: "The twin headwinds of Brexit and coronavirus means sentiment towards the UK remains divided.
"Investors should be careful not to write off the domestic market however, as the uncertainty has created some good value opportunities.”
sally.hickey@ft.com
