In Focus: Passive Investing  

ESG attracts two thirds of September fund flows

ESG attracts two thirds of September fund flows

Responsible investment funds attracted two thirds of UK fund flows in September, as investors pumped £1.6bn into the funds.

In total retail sales amounted to £2.3bn in the month, with ESG seeing the second highest month of inflows since March, according to the Investment Association.

By comparison, in August responsible funds saw inflows of £1.3bn, and in July it was close to £1.4bn.

Responsible investment Fum now sits at £85bn, and their overall share of industry Fum was 5.5 per cent at the end of September.

Chris Cummings, chief executive of the Investment Association, said: “It is encouraging to see investors’ continuing commitment to sustainability in the run-up to the crucial Cop26 negotiations.

"This is reflected in the strong inflows into responsible investment funds in September, which accounted for two-thirds of the total funds."

However, things were not as rosy overall with retails sales down from the bumper £5.3bn sold in August.

If sales were to continue at this pace, 2021 would not overtake the record seen in 2017, as some analysts predicted last month.

So far this year around £37bn has been invested in retail funds, compared with the £49bn invested in 2017. Net retail flows would have to increase to £4bn each month in order to reach the previous record.

Equity was the best-selling asset class in September with £984m in net retail sales. However this was the first time this figure was under £1bn since February.

The best-selling equity fund region was Global, with net retail sales of £1.09bn. UK funds on the other hand suffered a second month of weakening investor appetite, with net retail outflows of £584m, following £444m of outflows in August.

Cummings said: “The FTSE’s performance has been solid in recent months and the rebound in UK companies paying dividends continues, but investor appetite for UK equities has weakened for the second consecutive month.

"Uncertainty remains over the pace of economic recovery into 2022 and the outlook for inflation as supply chain and labour challenges continue to bite in the run up to Christmas.”

September was a better month for property funds however, which saw inflows of £90m. Uncertainty over a new structure for property funds has caused unprecedented flows out of the vehicles, with £499m withdrawn in the five months between February and June this year.

sally.hickey@ft.com