Investors continue to flee equity funds ahead of EU referendum
Retail investors withdrew £635 million from equity funds in April, according to the latest industry figures from the Investment Association (IA).
Fixed income funds were the most-popular asset class with net retail sales of £679 million. This is almost double the £360 million they took in March. Meanwhile, trackers also proved popular, attracting £454 million.
Overall, £1.2 billion was invested in funds by UK investors, up from £921 million in March but down 33% year-on-year (from £1.8 billion).
This, however, marks an improvement compared to earlier this year. In January and February fund sales slumped, with more money withdrawn than invested.
Targeted absolute return was the best-performing sector for the fifth consecutive month, taking in £742 million (up from £668 million in March), while the UK all companies sector was once again the worst performing, shedding £669 million.
With the referendum on the UK's membership of the European Union edging closer, the figures show investors are becoming ever-more cautious as sterling bond funds took in £488 million of flows, up from £163 million in March. Investors have other concerns, including China's slowing economy and tensions in the Middle East.
The IA has changed the way it calculates the statistics, in order to reflect investor behaviour rather than purely focusing on flows in and out of UK-domiciled funds, it says.
Guy Sears, interim chief executive of the IA, adds: “To reflect the international offering of the asset management industry, we will now be publishing figures that show UK investor behaviour regardless of whether the fund is registered in the UK or elsewhere.
“Following the slow start in January [when there was a total outflow of £1.25 billion], the industry has now seen three consecutive months of stronger net retail sales. This has mainly been driven by continued investor appetite for fixed income, tracker and absolute return funds.”
This article was originally written for our sister publication Money Observer.
Absolute return funds
Absolute return funds aim to deliver a positive (or ‘absolute’) return every year regardless of what happens in the stockmarket. Unlike traditional funds, they can take bets on shares falling, as well as rising. This is not to say they can’t fall in value; they do. However, over the years, they should have less volatile performance than traditional funds.