Savers invested £2.4 billion in investment funds in November 2021, with responsible investment funds enjoying a particularly strong month and tracker funds suffering.
The figures from the Investment Association showed that responsible investment fund flows increased sharply in November, accounting for over £1.8 billion in net retail sales.
However, global funds remained the best-selling sector for the sixth straight month, with net retail sales of £866 million. Japan was second with net retail sales of £82 million.
In contrast, tracker funds experienced the lowest level of inflows since March 2021 as investor uncertainty mounted.
Chris Cummings, chief executive of the Investment Association, said: “The retail funds market was stable in November as investors remained committed to funds, however low inflows into trackers hint at investor uncertainty, with US equities trackers and fixed income trackers particularly out of favour.
“There is one area of certainty however and that is the continued appetite for sustainable and responsible investments as investors continue to seek to use their investing power for good.”
Commenting on the rise in responsible investing, Laith Khalaf, head of investment analysis at AJ Bell, said: “Ethical fund sales are keeping the lights on in the UK investment industry. What is less clear is how much of this money is being directed into funds that are dyed-in-the-wool ESG champions, compared to traditional funds that have integrated ESG considerations into their investment process, which most would see as a less vigorous approach to investing ethically.”
The IA data showed that the worst-selling sector in November was UK All Companies, which experienced outflows of £545 million while UK funds saw £755 million of outflows overall. Meanwhile, Asia saw net retail outflows of £191 million and European funds experienced outflows of £98 million.
Khalaf commented: “Investors have been shunning the domestic market for more than five years now, and this trend shows no signs of abating, despite the cyclical value stocks which populate much of the Footsie having an improved year in 2021.
“As a whole, regional equity strategies saw an outflow of £474 million, as the flows into global funds were not enough to counteract the money being withdrawn from the UK, the US and Asia in particular. Equity flows as a whole were positive though, at £918 million. This puzzler can be partially explained by a £1.4 billion inflow into funds which sit in the ‘Unallocated’ bucket, in other words they have not chosen to be allocated to a sector.”
Khalaf added: “Tracker funds had an uncharacteristically weak month in November, registering sales of around half their normal level. That might suggest some skittishness about allocating cash to the market, even before Omicron took some wind out of bullish sails. December’s fund flows are likely to have taken a hit from concerns over the new COVID variant, but overall 2021 will have been a bumper year for fund sales, perhaps not eclipsing 2017’s record busting figures, but likely finishing in an honourable second place.”
