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Mixed Asset funds benefit as volatility hits markets

10 April 2018

Mixed Asset was the best selling asset class in February, as stockmarket volatility increased with the fall in markets from the first week of that month.

Investment Association data show that Mixed Asset significantly outstripped other asset classes, pulling in £1 billion in net retail sales in February, with Money Market (£455m) and Property (£94m) being the next closest in sales.

In terms of asset allocation, Europe was the most favoured destination followed by Asia and Japan.

UK Equities were the least popular asset class seeing outflows of £510m.

£ Strategic Bond was the best-selling sector with net retail sales of £346 million

The Investment Association further reported that tracker funds saw a net retail inflow of £796 million – with funds under management at £166 billion as at the end of February 2018and overall share of industry funds under management at 13.7% (compared with 13.4% in February 2017).

Ethical funds experienced net retail outflows of £1 million in February 2018. Funds under management were £15.2 billion, representing a 1.3% share of industry funds under management.

Overall, net sales in February were notably down on January, £1.2bn as against £3.7bn.

Commenting on the figures, Alastair Wainwright, fund market specialist at the Investment Association , said: “The old saying, ‘when the US sneezes, the rest of the world catches a cold’, was shown to still be true in February. US markets sold off on 5th February as strong employment figures caused concern that the Federal Reserve will need to raise interest rates higher than expected.

“The contagion swiftly moved round world markets with Asian and European bourses all falling significantly. Volatility was also present in bond markets as yields increased, but soon fell, as investors moved quickly to take advantage of the higher yields on offer.

“In this context, investors showed more caution allocating to North American and Global equity funds, which saw small outflows. This led to net equity fund sales turning negative for the first time since January 2017, with an outflow of £136 million. However, the largest detractor continues to be UK equity with a £510 million net outflow in February. Investors continued to allocate to Asian, European and Japanese equity funds.

“Fixed Income funds also experienced a net outflow in February with negative net sales in the £ Corporate Bond and Global Bond sectors, and, compared to previous months, a smaller net flow into Strategic Bond funds.

“Retail sales flows into Mixed Asset funds told a different story, with a net retail inflow of just over £1 billion. Investors in Mixed Asset funds tend to be agnostic to short term market events as asset allocation is in the hands of their fund manager. The last net retail monthly outflow was in January 2016 and within that time period we have seen 11 months where net retail sales exceeded £1 billion.

“Interestingly, Tracker funds, whose returns are more sensitive to market volatility, received positive net retail inflows into all asset classes.”

Best selling sectors 2018

Asset allocation February 2018

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