Interactive Investor

Investors ditch funds, with tracker sales also turning red

5th August 2022 10:17

Kyle Caldwell from interactive investor

Tracker funds had been bucking the wider selling trend, but in June posted their first outflow since July 2016. Kyle Caldwell runs through all the details.

Funds suffered their second-highest investor exodus on record in June, with £4.5 billion withdrawn.

The outflows were, however, well below the highest on record, when £10 billion was pulled in March 2020 as investors reacted to lockdown measures in response to the Covid-19 pandemic.

This time, investors are fretting over the prospect over a recession, high inflation, and interest rate rises.

All the major asset classes were ditched in June, with equity funds the most unpopular, with £2.3 billion exiting. Data from the Investment Association (IA) shows the outflows were largely coming out of globally diversified equity funds, which lost £1.3 billion. This marks the highest withdrawal since the aftermath of the 2016 Brexit referendum vote.

Money market and bond funds were also out of favour, losing a respective £1.1 billion and £653 million.

Some fund sectors bucked the trend. The most-popular sector, attracting £248 million, was Volatility Managed. This was followed by Global Equity Income and Mixed Investment 40-85%, which posted inflows of £189 million and £112 million.

Also keeping their heads above water were UK Gilts and Infrastructure, which gained £108 million and £99 million.

In terms of regions, just one – Japan – posted an inflow, receiving £15 million.

Passive fund sales also slipped into the red. While the outflow number is low, at £41 million, it is significant as it is the first time since July 2016 that money has exited funds that aim to match the performance of a stock market index.  

At interactive investor, some customers have over the past month been upping exposure to risk assets on the back of the recent stronger showing for stock markets, particularly US shares. 

In our top 10 most-bought funds table, which is based on the number of buys among ii customers in July, Baillie Gifford American, L&G Global Technology Index and Vanguard FTSE Developed World ex-UK Equity Index re-entered the top 10. In our investment trust table, increased risk appetite was reflected by Henderson Far East Income (LSE:HFEL) entering the top 10.

While some investors have been upping risk, there’s still plenty of caution. For funds, this is reflected in seven of the top 10 being passive funds, with investors prepared to accept the market return minus fees rather than seek out active fund managers.

Meanwhile, in our investment trust top 10 wealth preservation strategies continue to prove popular, with Capital Gearing (LSE:CGT), Ruffer (LSE:RICA) and Personal Assets (LSE:PNL), all featuring.

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