Investment Association figures show where retail investors put their money in March. Investors pulled £365 million from the UK All Companies sector, marking two years of continuous outflows. Contributor Laith Khalaf, Senior Analyst – Hargreaves Lansdown.
The latest set of Investment Association (IA) data tells us where investors were putting their money in March, during peak ISA season. It was yet another poor month for the UK All Companies sector as investors pulled out £365 million, marking two years of continuous outflows. Since March 2017 retail investors have yanked £6.9 billion from funds in the sector. Over the last two years UK All Companies funds have made on average just 6.3 percent, while the Global sector has returned 12.0 percent and North American funds made 13.8 percent.
More broadly investors moved fairly decisively from equity funds into fixed income, pulling £630 million out of stocks and pumping £810 million into bonds. However, below the surface Global equity funds remain the most popular option, recording inflows of £691 million. At the other end of the scale European funds were hardest hit as investors redeemed £412 million.
Overall retail fund sales were negative as investors took out £205 million, compared to inflows of £1,605 million in March last year. There have now been six months of net retail outflows from funds overall.
Index trackers maintained their steady march onwards and have cracked 16 percent of funds under management for the first time ever, recording £951 million in inflows in March.
However, ethical funds encountered a blip – for the first time in over a year they recorded a net outflow (£69 million). This is a surprising break from the slow but steady inflows ethical funds have experienced over the past decade. However, as a proportion of overall fund assets, the dial hasn’t really shifted a great deal in that time. In 2009 ethical funds held just 1.2 percent of total funds under management compared to 1.4 percent now, though there has been momentum in recent years.
Laith Khalaf, Senior Analyst, Hargreaves Lansdown: ‘Funds industry data continues to paint a pretty bleak picture of sales at the end of the tax year. That doesn’t necessarily mean investors weren’t taking advantage of their ISA allowance, they were just reticent about investing it, with many parking their money as cash pending a decision. That’s not too hard to fathom, seeing as March was peak Brexit season, as well as the end of the tax year.
The UK continues to be sharply out of favour, while Global funds are enjoying a long spell in the limelight. Bonds also had a good month, which suggests declining risk appetite amongst investors. There was a rare outflow from ethical funds in the month, reversing some of the momentum we have seen in recent years.
Despite negative fund sales so far this year, markets have actually started off on a bit of a tear, rebounding sharply from a weak end to 2018. Investors should avoid trying to time the market, and delaying decisions until after Brexit could prove to be a little like waiting for Godot. In the meantime they could lose out on valuable returns. One way for investors to hedge their bets is to put money to work in the market on a monthly basis, and as ever maintaining diversification in their portfolio.’
