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Investors flock to funds in record numbers but shun UK

Investors flock to funds in record numbers but shun UK

by Michelle McGagh Aug 07, 2017 at 11:20

Investors ploughed a record-breaking £18.4 billion into funds in the first half of the year but the focus on overseas investment reveals they are still cautious about the Brexit effect.

Figures from the Investment Association (IA) reveal that following the inflows in the first six months of the year, funds under management now stand at £1.1 trillion. Net inflows in June reached £2.9 billion, a reversal of the trend a year ago, when a net £3 billion was pulled out of funds.

The record-breaking figures shows investors have ‘returned from their 2016 hiatus’, said IA fund market specialist Alastair Wainwright.

All asset classes reported an uptick in flows in the first half of the year, with mixed asset funds attracting the highest at £5.7 billion, followed by bond funds at £4.2 billion, while equity funds rebounded from last year's outflows to attract £4.1 billion of net investment.

The most popular funds were those in the Targeted Absolute Return sector, which attracted £2.2 billion in the first half of the year. The Sterling Strategic Bond sector brought in £1.8 billion and Global Equity sales were £1.6 billion.

UK equity sectors were the least popular, with investors withdrawing £1.1 billion from the three UK equity sectors in June. The worst-selling sector in June was the UK All Companies sector, which racked up outflows of £486 million.

Global funds were the best-selling in June, attracting £465 million of inflows, followed by Targeted Absolute Return funds at £447 million and Strategic Bond funds at £363 million.

Adrian Lowcock, investment director at Architas, said while the headline figures suggested 'animal spirits' had returned to markets, the underlying trends presented 'a more mixed picture'.

He pointed to the lack of appetite for UK equity funds, and the enthusiasm for targeted absolute return investments, as evidence of investor caution.

‘Investors are clearly cautious on the outlook for the UK and concerned about the impact rising inflation is having on the UK economy and the effects Brexit will have on the country’s economy,’ he said.

Lowcock argued high valuations were also leading investors to protect themselves against a potential market fall.

'Investors remain sceptical and are holding defensive assets including absolute return funds to protect themselves in the event of a correction or sell-off,' he said.

'Given that markets seem to be ignoring the risks and focusing on the positives this seems to be a sensible course of action

Despite the switch into global funds, he warned that there is still a ‘cautious tone’ due to inflated stock valuations.

‘While earnings growth has helped support major markets, driving some to record new highs, investors remain sceptical and are holding defensive assets including absolute return funds to protect themselves in the event of a correction or sell off,’ said Lowcock.

‘Given that markets seem to be ignoring the risks and focusing on the positive, this seems to be a sensible course of action.’

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Comments  (19)

  • an elder one: 

    Time to sell foreign funds? I'll stay with UK equities and look to buy more.

    18:04 on 07 August 2017

  • Chris Clark: 

    "Investors flock to funds in record numbers but shun UK"

    Quite right. I have taken 85% of my not very big SIPP outside of the UK. I shall not invest in Brexit Britain.

    09:11 on 12 August 2017

  • Donald Chan: 

    Chris, do you think your pronouncement helps or hinders the UK?

    09:29 on 12 August 2017

  • Philip Drew: 

    There is a lot of easy to digest information about UK/US companies available to me so I tend to directly invest in UK companies but use Investment Trusts to invest on non-english speaking countries.

    10:37 on 12 August 2017

  • Capt Ahab: 

    Time to sit on one's hands and wait for things to cool down and not to wade into the Stockmarket. Losing face is a major facet of Chinese/Korean culture, and probably Donald Trump as well. One wonders at the next step with things being ramped up to fever pitch. A mistake could easily lead to serious conflict

    10:40 on 12 August 2017

  • Chris Clark: 

    @Donald, actually, you make an interesting point. I'm a strong Remainer as folks might have guessed. I have been receiving a fair number of emails by brexit-facing organisations saying how to make money out of brexit, and one organisation known to be supported by wealthy brexiteers offered me a 2 year brexit opportunities advice service for around £2,600. This revolved mainly about identifying UK quality tech companies for foreign takeover, with the high paying jobs, whilst share prices were depressed. Imagination Tech Group was one of them, and we all know about Unilever.

    I declined the offer but am following the strategies. They work.

    12:03 on 12 August 2017

  • Donald Chan: 

    @Chris, of course I realised you are a Remainer. Without wishing to over simplify the argument, it is becoming clear that the two sides of the Brexit argument are determined upon whether one believes in the future of this country as an independent trading nation (or not). Your comment " I shall not invest in Brexit Britain." indicates which camp you fall into. If you were a serious investor, you would already have an international portfolio arranged according to your view of the world. As a trading nation, you would be aware, UK companies have far reaching links already with the rest of the world and their income is dependent upon these overseas activities. You will have spread your risk according to your personal inclinations. The idea that there are certain pre-Brexit strategies " that work". is a nonsense.

    13:23 on 12 August 2017

  • Chris Clark: 

    @Donald. I started out with my view of the world. That is the brexiteer strategies work for them, and are working for me. If you regard this evidence as nonsense then this is a useless conversation. You may wish to ask yourself why exactly extremely wealthy brexit leaders like Aaron Banks campaigned so hard to quit. You can see why I'm raising this.

    Oh btw, as of yesterday:

    FTSE100 YTD = 2.3%

    All-World Index = 11.8%

    Source: FT

    19:05 on 12 August 2017

  • Donald Chan: 

    @Chris, what is the timing? When did you adopt these "strategies"? If they are strategies for the future, at what point in time do you decide they are working? I am not sure what approach you are taking regards investment. You indicate that you are following examples set by wealthy "Brexiteers" such as Aaron Banks. I admit, I don't have a clue what you are doing investment-wise.

    22:24 on 12 August 2017

  • Chris Clark: 

    @Donald - straight after Remainers lost the vote last June. Firstly identify weakened British companies which are possible takeover targets by foreigners. Second consider British commodities companies likely to see increased profits through £/$ devaluation. Third, invest in European and International companies not affected by Brexit or a British slow down, and in recovering economies.

    All Brexit strategies I was advised by Brexiteers to use. My pension is up 19% since 1st January.

    Does anyone else yet see why wealthy Brexiteers campaigned to leave Europe?

    I remain a committed Remainer.

    22:36 on 12 August 2017

  • Donald Chan: 

    @Chris, OK, some elements of investment approach emerging. We all make an assessment of the potential. This contrasts somewhat with your bald statement " I shall not invest in Brexit Britain". However, what does "committed Remainer" mean in this context? Are you working for a reversion of Brexit? And, if so, how does that impact your investment strategy?

    09:20 on 13 August 2017

  • Chris Clark: 

    @Donald. I want an exit deal where I can not tell the difference between what we have now as EU member, and what we then have. A second referendum where Leave lose would achieve this for me. I would anticipate a return of R & D development and will invest in growth businesses with good R & D budgets.

    (Except I do want the EU Commissioners to be voted in, not appointed.)

    10:11 on 13 August 2017

  • Donald Chan: 

    @Chris (No chance)

    10:41 on 13 August 2017

  • Chris Clark: 

    @Donald, let's check in in March 2020. And do a portfolio update at the same time. :-)

    11:02 on 13 August 2017

  • Donald Chan: 

    @Chris, whatever. The difficulty I am having is understanding whether you are keen to share your investment insights or whether you are disseminating a political view on Brexit. The future of the UK economy is unknown but I would hope that it is good.

    My investment "strategies" are unknown to anyone else but regardless, I have hope and some confidence in the UK working its way through the upheaval. (Of course, we may have a nuclear war before then, but good luck)

    12:20 on 13 August 2017

  • Chris Clark: 

    @Donald, I hadn't really thought about it, but if asked, I would probably say here is one's way of demonstrating the financial consequences of Brexit at a micro level.

    17:42 on 13 August 2017

  • Donald Chan: 

    @Chris, not sure why we are the only two continuing this thread. I think we've bored off everyone else. We had better leave it with our diffrerences unreconciled.

    19:28 on 13 August 2017

  • Chris Clark: 

    @Donald - Agree. Everyone - welcome back!

    19:31 on 13 August 2017

  • Spartacus: 

    I'm very much in the shun UK camp. Not only are the prospects overseas far brighter, the pound is likely to continue sliding.

    19:56 on 13 August 2017

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