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Bonds fall out of favour as savers pull £1.6bn from Fixed Income funds

Thursday 6 December 2018

The Investment Association’s monthly statistics of UK investor behaviour in October 2018 show:

  • Net retail sales were negative in October, with £1.6 billion of outflows from UK authorised and recognised funds, and funds under management totalling £1.2 trillion.
  • Fixed Income experienced net retail outflows of £1.6 billion.
  • Global was the best-selling sector with net retail sales of £354 million.

Chris Cummings, Chief Executive of the Investment Association, said:

“Savers are stepping back from bonds with notable outflows from Fixed Income funds in October. With the era of quantitative easing anticipated to end in both the US and Europe, Fixed Income funds have seen their appeal dented. This declining appetite for bonds has contributed to UK funds experiencing their largest net retail outflow since the EU referendum, although it remains to be seen whether this is the start of a broader trend within Fixed Income.”

FUNDS UNDER MANAGEMENT AND NET SALES

Funds Under ManagementNet Retail SalesNet Institutional Sales
October 2018£1.2 trillion-£1.6 billion-£630 million
October 2017£1.2 trillion£5.3 billion£2 billion
ASSET CLASSES

Mixed Asset was the best-selling asset class with £443 million in net retail sales.

Money Market were the second best-selling asset class with net retail sales of £215 million.

Equity was the third best-selling asset class with net retail sales of £100 million.

Property experienced a net retail outflow of £39 million, followed by funds classified as Other (which includes the Targeted Absolute Return and Volatility Managed), which experienced outflows of £735 million.

Fixed Income experienced outflows of £1.6 billion in net retail sales.

NET RETAIL SALES OF EQUITY FUNDS BY REGION*

North America funds were the best-selling in October with net retail sales of £122 million.

Asia funds were the next best-selling with net retail sales of £113 million.

Japan funds were the third best-selling with net retail sales of £100 million.

Global and Europe funds experienced net retail inflows of £50 million and £7 million, respectively.

UK funds experienced net retail outflows of £214 million.

RegionNet retail

sales
in October 2018

Average net

retail sales for previous 12 months

North America£122 million£116 million
Asia£113 million£145 million
Japan£100 million£144 million
Global£50 million£255 million
Europe£7 million£52 million
UK-£214 million-£425 million

THE INVESTMENT ASSOCIATION SECTOR RANKINGS

The five best-selling Investment Association sectors for October 2018 were:
  • Global was the best-selling sector with net retail sales of £354 million.
  • Mixed Investment 40-85% Shares with net retail sales of £228 million.
  • Volatility Managed with net retail sales of £137 million.
  • Asia Pacific Excluding Japan with net retail sales of £120 million.
  • Short Term Money Market with net retail sales of £113 million.
The worst-selling Investment Association sector in October 2018 was Targeted Absolute Return with an outflow of £705 million.

Investment

Association Sector

Ranking in October 2018Net retail sales in October 2018Ranking in September 2018Net retail sales in September 2018Asset Class
Global1£354 million2£236 millionEquity
Mixed Investment 40-85% Shares2£228 million1£268 millionMixed Asset
Volatility Managed3£137 million4£172 millionOther
Asia Pacific Excluding Japan4£120 million7£97 millionEquity
Short Term Money Market5£113 million34

-£38 million

Money Market

RETAIL DISTRIBUTION

In October, gross retail sales for UK fund platforms totalled £9.6 billion, representing a market share of 46.2% (39.7% in October 2017).

Other Intermediaries including UK IFAs made gross retail sales of £5.2 billion, representing a market share of 25.1% (27.3% in October 2017).

Direct gross retail sales in September were £1.5 billion, representing a market share of 7.1% (6.9% in October 2017).

FUND PLATFORM PRODUCT SALES

The five fund platforms that provide data to The Investment Association (AEGON, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) saw net inflows of £379 million in October.

Personal Pensions had net sales of £608 million. Insurance Bonds saw net outflows of £4 million, whilst Unwrapped and ISAs experienced net outflows of £89 million and £135 million, respectively.

For the same five fund platforms, funds under management as of the end of October 2018 were £265 billion, compared with £255 billion a year earlier.

ISAs**

In October 2018, funds in ISAs provided by fund companies and the five fund platforms that feed data to The Investment Association (AEGON, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) saw a net retail outflow of £351 million.

The three best-selling sectors for ISAs based on the five fund platforms were:

  • Mixed Investment 40-85% Shares (£24.6 million net sales)
  • Mixed Investment 20-60% Shares (£24.3 million net sales)
  • Volatility Managed (£15 million net sales)

FUND OF FUNDS

Funds of funds had a net retail inflow of £294 million in October.

Funds of funds that invested externally saw net retail sales of £64 million, while funds that invested internally saw net retail sales of £230 million.

Funds under management for funds of funds were £152 billion at the end of October 2018, accounting for 12.7% of industry funds under management, compared with 12.3% in October 2017.

TRACKER FUNDS

Tracker funds saw a net retail inflow of £565 million. Tracker funds under management stood at £187 billion as of the end of October 2018. Their overall share of industry funds under management was 15.6%, compared with 14.5% in October 2017.

ETHICAL FUNDS

Ethical funds experienced net retail inflows of £91 million in October 2018. Funds under management were £16 billion at the end of October, representing a 1.3% share of industry funds under management.

-ENDS-

For further information, please contact:

Anisha Patel, Head of Communications: Anisha.Patel@theia.org

T +44 (0)20 7269 4635

Helen Ayres, Media Relations Manager: Helen.Ayres@theia.org

T +44 (0)20 7269 4620; M +44 (0)7508 724 066

Notes for Editors

To see a breakdown of the data referenced in this press release, please see all of the tables here.

The Investment Association's figures for fund sales cover retail and institutional sales in authorised unit trusts and open ended investment companies (OEICs) provided by our membership to UK investors. The figures do not include investment trusts and ETFs.

Each month small revisions to figures have been made since the previous press release. This reflects additional information received by The Investment Association.

Net retail sales comprise total retail sales minus repurchases (including switches between funds), thus the figures can result in a negative figure or outflow.

* Regional breakdown for equity funds

The following Investment Association sectors have been grouped together to compile the figures for regional equity sales:

AsiaEuropeGlobalJapanNorth AmericaUK
Asia Pacific excl. JapanEurope excl. UKGlobalJapanNorth AmericaUK All Companies
Asia Pacific incl. JapanEurope incl. UKGlobal Emerging MarketsJapanese Smaller CompaniesNorth America Smaller CompaniesUK Equity Income
China/Greater ChinaEurope Smaller CompaniesGlobal Equity IncomeUK Smaller Companies
Specialist
Technology and Telecommunications

Direct Channels

Direct includes sales forces and tied agents, private clients and other direct to investor sales without intermediation.

** The Investment Association’s ISA figures are based on information collected from fund companies and five fund platforms (AEGON, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact) where they are the ISA provider. Fund business through other ISA providers such as wealth managers is not included. The Investment Association’s figures cover about three-quarters of the whole of the market for funds held in ISAs.

About the Investment Association:

The IA champions UK asset management, supporting British savers, investors and businesses. Our 250 members manage £7.7 trillion of assets and employ 100,000 people across the UK.

Our mission is to make investment better. Better for clients, so they achieve their financial goals. Better for companies, so they get the capital they need to grow. And better for
the economy, so everyone prospers.

  • Our purpose is to ensure investment managers are in the best possible position to:
  • Build people’s resilience to financial adversity
  • Help people achieve their financial aspirations
  • Enable people to maintain a decent standard of living as they grow older
  • Contribute to economic growth through the efficient allocation of capital.

The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.

The UK is the second largest investment management centre in the world, after the US and manages 35% of all assets managed in Europe.