Net sales via Skandia’s Investment Solutions platform have seen flows into UK equity funds increase by almost 40% since Q2 2013.
UK equities accounted for 19% of total sales and a third of all equities sales, overtaking global specialist funds as the second most popular asset class for the first time this year. This swing reflects the strong performance of UK equities, in particular the more domestic orientated FTSE 250 that has delivered 26.5%* over the last year.
Whilst the popularity of UK equities is on the rise, it is still multi-asset funds that dominate net sales, as the trend for outsourcing continues. Multi-asset funds accounted for nearly a third (31%) of total sales this quarter and have seen an increase in share of sales of over 25% since Q2. They are at their highest share of flows so far this year.
In contrast, flows into UK fixed interest and cash have sharply declined as investor confidence in equities returns. UK fixed interest funds have dropped from the third most popular asset class at Q2 to the 6th now. In particular, traditionally ‘safe’ investments such as gilts and corporate bonds have fallen out of favour, as concerns about low yields and rising interest rates spook investors. However, more flexible fixed interest sectors such as strategic bonds, global bonds and high yields continue to sell well despite the general decline.
The top 10 selling funds based on net sales over the Q3 are as follows:
Kames Sterling Corporate Bond
Old Mutual Spectrum 5
Henderson UK Property Unit Trust
M+G Global Macro Bond
Newton Asian Income
Invesco Perpetual Distribution
Cazenove UK Opportunities
Invesco Perpetual Monthly Income Plus
Old Mutual Spectrum 4
JPM US Equity Income
In contrast to the overall trends, a corporate bond fund; the Kames Sterling Corporate Bond was the bestselling fund and only one UK equity fund; Cazenove UK Opportunities, appeared in the top 10.
James Millard (pictured), director of investments at Skandia, says: “The rising popularity of UK equities as an asset class is a clear sign that investors are shifting exposures on seeing more positive signs of economic growth such as 0.7% growth in GDP for Q2. Expansion is clearly visible within the services, industrial and construction sectors, whilst business and consumer confidence also continues to improve. As a result investor confidence is returning and fixed interest fund sales have dramatically reduced.
“Investors are still favouring outsourced multi-asset funds as they look to diversify their portfolios with professional expertise. This again demonstrates the desire to invest, but in a risk-controlled manner to ensure diversification and manage volatility.”