Retail fund sales slump as investors 'wait and see'

Retail fund sales slump as investors 'wait and see'

Retail investment fund sales slumped in October to their lowest level since September 2020.

Figures from the Investment Association showed £1.7bn of net investment flowed into funds in October, down from £2.3bn in September, with a noticeable drop in flows to equity funds.

Overall, equity funds experience net inflows of £280m, down from £984m in September. The sector had previously seen inflows of above £1bn since February this year.

UK equity and North American funds saw the worst drop in flows, with outflows from UK equity funds at £660m, up from outflows of £584m in September and £444m in August.

The UK Equity Income sector has experienced 12 months of consecutive outflows, posting outflows of £235m in October, while the UK All Companies sector saw outflows of £349m in October, making it the worst selling sector that month.

Funds in the North American and North American Smaller Companies sectors saw net outflows of £186m, down from net inflows of £125m in September.

Chris Cummings, chief executive of the Investment Association, said a key theme for October seemed to be “wait and see” for investors. 

“Uncertainty around how much, and how fast, interest rates are going to rise to try to ease inflation may be a factor but investors are also feeling the pinch of rising prices and may simply feel less able to put money aside, whether to cash savings or investments.”

He added that investors would also be keeping an eye on when and how much central banks start to unwind quantitative easing by, which will have an impact of equity valuations.

Markets reacted with histrionics to the Bank of England’s decision not to raise interest rates at its most recent monetary policy committee meeting, with some saying investors shouldn’t hang too closely on every speech and interview given by rate setters.

Remarking on the recent discovery of a new Covid-19 variant, Cummings said: “Time will tell how the Omicron variant will impact sales in November and December.”

The Global sector was the best-selling IA sector for the fifth consecutive month, with £730m in inflows, however this was down slightly from the inflows of £955m and £835m seen in September and August respectively.

Meanwhle the Volatility Managed and Mixed Investment 40-85% Shares sectors continued to be strong sellers, seeing £387m and £402m of inflows during October respectively, and having been in the top three selling sectors for five of the past seven months.

Inflows to responsible investment funds remained sturdy with £1.5bn of net retail sales. These funds attracted two thirds of UK fund flows in September, as investors pumped £1.6bn into the funds.