Strong demand for investment companies in Q2 despite market turbulence

by | Sep 6, 2022

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Purchases of investment companies on adviser platforms totalled £361m in the second quarter of 2022, 20% higher than in Q2 2021 and the second-highest quarterly figure on record, according to data released today by the Association of Investment Companies (AIC) and compiled by ISS Financial Clarity.

This was matched by strong net demand of £151m, which was also the second-highest figure ever recorded1.

Despite the market falls in the first half of the year, there were purchases of £700m between January and June, the highest level of purchases ever in a six-month period.

Reflecting the market turbulence, the Flexible Investment sector was particularly popular. This sector, which is home to investment companies that can invest in a range of different asset classes, accounted for 17% of purchases, more than any other AIC sector. The Global sector, which had occupied the top spot for purchases during the previous 20 quarters (five years) fell to second place in Q2 with 13% of purchases.

Also popular in the quarter were UK Smaller Companies, with 7% of purchases, Property – UK Commercial (6%), UK Equity Income (5%) and Infrastructure (5%).

Nick Britton, Head of Intermediary Communications at the Association of Investment Companies (AIC), said: “The healthy level of demand for investment companies during some difficult months in the market shows that advisers and wealth managers are taking a long-term perspective. Historically, market downturns have been great times to buy investment companies, though that’s not to say things won’t get worse before they get better.

“It’s noteworthy that the Flexible Investment sector proved so popular last quarter. This sector contains investment companies that can invest in a range of assets, including a few well known ‘capital preservation’ mandates. It doesn’t take too much imagination to guess why these might have been popular this year.

“On the other hand, a strong showing for sectors trading on wider-than-usual discounts, such as UK Smaller Companies, suggests that some buyers may have been shopping for bargains.”

The number of firms purchasing investment companies on adviser platforms was 1,903 in the quarter. This included 1,756 advice firms and 50 wealth managers, with the number of wealth managers in the market reaching a five-year high.

The resilient demand for investment companies in the second quarter of the year bucked a broader decline in total platform purchases. Purchases of all products on adviser platforms fell to £48.93bn in Q2, 5% lower than the same quarter last year.

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