The fall equated to net sales of £400m last year, and prompted analysts dialling in to the fund house's results presentation on Tuesday to ask additional questions of the company.
Some queried the size of the sales drop relative to those seen elsewhere in the industry, pointing to more resilient flows at the likes of St James’s Place and Quilter.
In response, M&G chief executive John Foley pointed to those businesses' greater control of distribution as being of particular aid over the past 12 months.
M&G has made its own move into distribution, having paid £86m to buy Ascentric from Royal London in September.
The asset manager has made no secret of the benefits it sees Ascentric bringing to PruFund, and Foley told analysts “we would hope that would be the mechanism for [PruFund] sales in the future”.
The absence of a major internal distribution channel was not the only explanation provided. Chief financial officer Clare Bousfield noted the £55bn PruFund range is largely a decumulation offering: it is typically offered at the point of retirement - arguably the most complex point in a client’s financial life.
She suggested remote conversations in this area have proven particularly difficult.
“If you look at the income drawdown market, what you’ll see is that’s dropped by 40-45 per cent, which is broadly in line with the drop you’re seeing in PruFund sales,” Bousfield told analysts.
The catalyst for the 94 per cent drop was largely lower sales, rather than increased outflows: sales volumes fell from £10.2bn to £5.2bn, while outflows rose from £3.8bn to £4.8bn.
The latter point, the company says, is in line with previous years and the consequence of a maturing book of business; M&G provided a similar reason for rising outflows in 2020. It remains to be seen how much pressure that puts on the net flow picture in the coming years.
There could feasibly be other reasons for the drop in appetite. Defined benefit transfer activity – of which PruFund has been a major beneficiary in recent years – has continued to drop markedly over the past 12 months amid an ongoing crackdown on DB advice from the FCA.
The number of DB transfers made in 2019-20 dropped by 28 per cent compared with the previous tax year, according to the regulator's own data, and it is likely this slump persisted throughout 2020.
However, that story may have already played out for PruFund. M&G said a year ago that DB transfers accounted for less than a fifth of PruFund sales in 2019, having come down “significantly” over the 12-month period. That figure could still have amounted to around £2bn in gross sales in 2019. But even if this source went to zero last year, that would leave another £3bn fall in gross sales unaccounted for.
There are other possibilities. The negative valuation adjustments to PruFund’s pricing introduced following markets’ pandemic-induced slump may also have had an impact. As with with-profits funds of old, these adjustments are part and parcel of this kind of investment approach. But after several years of positive performance, their introduction may have been an untimely reality check for advisers and their clients.
Remote working has brought other issues: advisers have complained of their frustrations with Prudential’s service over the past year as they grappled with the fallout from the pandemic.
Whatever the reasons, M&G is expecting flows will pick up again as and when advisers' face-to-face meetings resume. It is also anticipating a new surge in demand, despite some rivals' belief that the PruFund offering is expensive and therefore at particular risk of competitive threats.
Asked by one analyst whether there might be “pent-up demand” as a result of the pandemic, Foley said: “we would hope there is a catch up there”.
dan.jones@ft.com
