Fund managers saw the year get off to a buoyant start in the first quarter as investors continued to flock to funds, buying direct as well as within Isa wrappers, a report by Lipper FMI says.
Gross total sales topped GBP37bn, according to the Investment Management Association.
Although net sales were somewhat down on the previous three quarters, retail sales reached record proportions for a first quarter at over GBP5.5bn.
Institutional investment was also positive. Although there have been some outflows from investment grade corporate bond funds in recent months, bonds as an asset class have returned to favour in 2010 overtaking equities for the first time since the second quarter of last year. They attracted GBP1.5bn net, while equity funds pulled in GBP1bn.
The ongoing appeal of bond funds was reflected in the fact that the most successful new fund launch in the first quarter was Invesco Perpetual’s Tactical Bond fund which attracted just shy of GBP150m in its initial launch period. However, other funds such as mixed asset funds also held their own.
Lipper FMI says the resilience of bond fund sales was reflected in M&G’s continued dominance of the retail sales tables. This is the sixth consecutive quarter that the UK’s oldest fund manager has topped these charts. Its best selling fund was Optimal Income, a flexible bond fund. Another top seller was the more self-explanatory Strategic Corporate Bond.
Absolute return funds also played a strong role in the first quarter. These funds are increasingly regarded as core, rather than peripheral holdings. BlackRock, which arguably has done most to popularise the concept, was one of the few major groups to see its first quarter sales exceed last year’s quarterly levels. Its best selling fund was UK Absolute Alpha which accounted for 22 per cent of its gross retail sales.
Several managers reported a growing interest in overseas equity income funds, according to the report. One group particularly well placed to gain from this trend is BNY Mellon, which rose to fourth position in the net retail sales chart. Quarter on quarter, its net sales rose by over 60 per cent. The top attraction was Global High Income, with its Asian and European income funds also appealing to investors who want to diversify their sources of income, as well as those who see income funds as a better hedge against a downturn than more aggressive growth funds.