Funds in the UK, Japan and North America all experienced outflows in October 2021, shows retail sales data from the Investment Association (IA), though the UK suffered far greater outflows than either of the other two regions.
The UK saw net retail outflows of £661 mn ($876 mn), compared with £187 mn from North America funds and £8 mn from Japan. The IA notes that ‘outflows from UK equities and North America were partly offset by inflows to funds investing in global equities (£586 mn).’ But it adds that the worst-selling IA sector in October 2021 was UK All Companies, which experienced outflows of £349 mn.
The IA says its data for fund sales covers retail and institutional sales in authorized unit trusts and open-ended investment companies provided by the organization’s membership to UK investors. The figures do not include investment trusts and ETFs. The IA’s membership is made up of 270 members managing £9.4 tn of assets.
‘The UK market continues to be unloved, despite the potential value opportunity versus global peers,’ says Emma Wall, head of investment analysis and research at broker Hargreaves Lansdown, commenting on the findings.
Wall notes the difference between US and UK equities in the research. ‘It is good to see investors taking gains from US equity funds, which have delivered considerable returns in recent years, driven by growth stocks and tech firms,’ she says. ‘Many US funds have defied the coronavirus headwinds faced by domestic equities here in the UK.’
The Omicron effect
Although global funds topped the most popular sector, Wall says it is worth noting that ‘these fund flows were prior to the recent identification of the new coronavirus variant, and the impact that has had on global markets.
‘We have seen a shift in the last week toward more defensive assets, and fund flows for November should reflect this change in sentiment.’
One theme that saw notable inflows is responsible investing, according to the IA figures, with retail investors apparently ‘keen to do good’ as well as seeking financial returns.
‘Responsible funds continue to see significant inflows from retail investors keen to do good and make money at the same time,’ comments Wall. ‘With an extra £1.5 bn invested in October, this now takes the total invested in responsible funds to £88.7 bn. It is small fry compared with the wider market, at just 5.7 percent of funds under management, but [it’s] making inroads.’