Interactive Investor

Bond funds still on the menu for UK retail investors

6th October 2020 09:54

Hannah Smith from interactive investor

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Fund sales continue to boom. Hannah Smith highlights the most and least popular sectors. 

UK savers ploughed £1.8 billion into retail funds in August, with bond funds in particular featuring on investors’ shopping lists, the latest fund sales figures show.

The Investment Association retail fund sales data shows that the total amount invested in retail funds contrasts with more than £500 million withdrawn during the previous August. 

Investors back bonds

Bond funds continued their strong run to take £1.4 billion in net retail sales over the month. As we explained last month, the hunt for income is likely to be a key driver of investors’ renewed focus on bonds. Companies across the marketplace have taken the axe to dividends in the face of Covid-19 pressures, forcing equity income investors to look elsewhere for more reliable sources of yield. 

Elsewhere, equity funds returned to positive net retail sales of £340 million. Unloved UK equity funds, however, continued to languish with outflows of £748 million. Investors continue to shy away from their home market due to uncertainty over Brexit, Covid-19 and the difficult backdrop for dividends.  

Property funds, which have just begun reopening after months of suspensions, saw £3 million withdrawn by investors.  

Tracker funds held steady, taking in a net £1.3 billion, while active funds saw an inflow of more than £500 million. Meanwhile, responsible investment funds took in £897 million during August, although these funds’ overall share of industry funds under management remains low at just 2.7%. Investor demand for sustainable investing has been on the rise in 2020, and in response various fund management firms have been scrambling to roll out new products with an ESG (environmental, social, and governance) slant. 

The bestselling sectors

The most popular sector was Global, attracting £705 million of net retail sales, followed by Global Bonds with £581 million. Mixed Investment 40-85% Shares, Strategic Bond and Europe ex UK completed the top five bestselling sectors. 

In contrast, the worst-selling sector was Short Term Money Market, which recorded a £557 million outflow. Money Market funds as a whole saw net outflows of £743 million over the month.

At the regional level, the second-most popular region (with Global taking first place) was Europe excluding UK. Asia and Japan took third and fourth place, respectively, followed by North America funds. 

“The last month of summer saw a cementing of saver confidence with £1.8 billion put into funds throughout August, in a further bolstering of the Covid-19 fund market recovery,” says Chris Cummings, chief executive of the Investment Association.

“Marrying financial returns with environmental, social and governance considerations continued to be popular with investors in August. Responsible investment funds attracted almost £900 million, proving their resilience amid ongoing economic uncertainty.”

 These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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