Fund outflows mount as uncertainty rises – latest report from The IA

by | May 5, 2022

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Investors’ response to tightening monetary policy in major markets and Russia’s invasion of Ukraine saw the third consecutive month of outflows from retail funds, up from £2.5 billion in February to £3.4 billion in March, according to data published today by the Investment Association (IA).

Other key findings for March 2022 include:

· Fixed Income funds saw outflows of £3.3 billion, as persistently high inflation and tightening monetary policy threatened to undermine investors’ returns.

· European Equity funds saw outflows of £505 million, up from £142 in February, reflecting the region’s economic exposure to Russia’s invasion of Ukraine.

· Mixed Investment 40-85% Shares was the bestselling IA sector in March with inflows of £579 million, as savers sought diversified investments amidst market volatility ahead of April’s ISA allowance deadline.

· Responsible Investment funds saw their strongest monthly inflows so far in 2022, accelerating from £670 million in February to £935 million in March.

Chris Cummings, Chief Executive of the Investment Association, said:

“Investors remained cautious in March in light of monetary tightening and Russia’s invasion of Ukraine. Although Russia launched its invasion of Ukraine in February, the economic ramifications of the conflict became clearer in March.

“Outflows from European Equity funds accelerated sharply to £505 million, as investors considered the risks of Europe’s dependence on Russian commodities.

“However, March was a story in two parts and outflows were balanced by many investors rushing to use their ISA allowance and seeking potentially safer havens in diversified funds, with multi-asset strategies benefiting in particular.

“Inflows to Responsible investment funds continued to be a bright spot, recording their strongest monthly inflows so far in 2022 and demonstrating investors’ commitment to sustainable investing.”

BEST SELLING INVESTMENT ASSOCIATION SECTORS

The five best-selling Investment Association sectors for March 2022 were:

  • Mixed Investment 40-85% Shares with net retail sales of £579 million.
  • Volatility Managed was second with net retail sales of £475 million.
  • Global Equity Income followed with net retail sales of £475 million.
  • Government Bond was fourth with net retail sales of £237 million.
  • Infrastructure was fifth with £173 million.
  • The worst-selling Investment Association sector in March 2022 was £ Strategic Bond, which experienced outflows of £528 million.

NET RETAIL SALES BY ASSET CLASS

Mixed Asset funds was the best-selling asset class in March 2022, with £429 million in net retail sales.

Other funds (which includes the Targeted Absolute Return, Volatility Managed, and Unclassified sectors) was the second best-selling asset class, with £412 million of inflows.

Property saw £119 million in outflows in March 2022.

Equity funds was fourth with outflows of £309 million.

Money Market funds saw £571 million in outflows in March 2022.

Fixed Income funds saw £3.3 billion of outflows.

NET RETAIL SALES OF EQUITY FUNDS BY REGION

North America was the best-selling equity fund region in March 2022, with net retail sales of £83 million.

Japan was second with net retail sales of £10 million.

All other equity regions experienced outflows.

Asia funds saw £79 million in outflows, while Global funds saw outflows of £163 million.

Europe funds saw outflows of £505 million, and UK funds saw outflows of £563 million.

TRACKER FUNDS

Tracker funds saw a net retail inflow of £1.2 billion in March 2022. Tracker funds under management stood at £299 billion as of the end of March. Their overall share of industry funds under management was 19.6%.

RESPONSIBLE INVESTMENT FUNDS

Responsible investment funds saw a net retail inflow of £935 million in March 2022. Responsible investment funds under management stood at £86 billion as of the end of March. Their overall share of industry funds under management was 5.7%.

GROSS RETAIL SALES BY DISTRIBUTION CHANNEL

In March, gross retail sales for UK fund platforms totalled £15.9 billion, representing a market share of 52.7%.

Gross retail sales through Other UK Intermediaries including IFAs were £6.9 billion, representing a market share of 22.9%.

Direct gross retail sales in March were £1.4 billion, representing a market share of 4.6%.

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