Net fund flows remain positive, while fixed income funds fall in popularity – IA data

Key findings for August 2023:

• Inflows into Tracker Funds doubled to £1.6 billion, from £860 million in July.
• Fixed Income Funds saw outflows of £356 million – the first outflows since October 2022.
• Responsible investments experienced a record outflow at £448 million, following a period of weaker sales.
• Global was the best-selling sector, with net retail sales of £368 million.
• Global Equity Income sector saw outflows of £66 million, the first outflows since November 2021.
  

Data published today by the Investment Association (IA)

Emma Wall, head of investment analysis & research, Hargreaves Lansdown:

“Positive flows into funds through August is good news – despite the challenges of inflation, economic uncertainty and strikes, retail investors continued to save. But the net figure masks a mixed bag.

Fixed income funds fell in popularity as bond value fell as yields rose and cash presented an attractive alternative low-risk asset. Global equity – particularly passive funds – have proved popular as an easy instant cross-market exposure in a market where making a tactical call is tough.

Investors should be mindful, however, that past performance is no guarantee of future returns, and particularly when a market has been so driven by momentum. Year-to-date, most of the returns in US, and indeed the global aggregate equity market, have been led by just seven stocks this year. At some point, this run will end. Whether the trigger is recession, stock specific, political or the oil price – the nature of a hyped market is it is sensitive. We have seen this earlier this week thanks to higher-for-longer rhetoric from the Fed monetary policy committee.

The market is currently pricing a ‘Goldilocks scenario’, which is not guaranteed to deliver. The likelihood is that over the course of the next 12 months, equity markets will rebalance, yields will fall and bond prices will rise. It is therefore important that investors remain diversified across asset classes and geographies, so they are best placed to ride out any market scenario when it comes.”

HL data