FTSE 100: 7682.27 ▲ 125.83 (1.67%)
Investors piled back into the stock market in March with net retail sales of investment funds jumping to a record £4 billion.
With political risks appearing to diminish on both sides of the Atlantic, the Investment Association reported shares proved more popular than more defensive asset classes like bonds, with net retail sales of equity funds of £1.7 billion.
After a year of investors pulling money from UK All Companies funds, the sector bounced back as the best-selling area since December 2013, with £650 million of net sales.
Tracker funds recorded inflows of £1.7 billion, the highest fund sales since June 2013, with £596 million of that directed into UK equities.
Analysis of Morningstar data by Numis Securities analyst Ewan Lovett-Turner showed leading tracker fund providers Vanguard and BlackRock experienced ‘significant net inflows in March’ alongside Threadneedle UK and Lindsell Train UK Equity funds.
Hargreaves Lansdown’s new UK Income fund, which was launched at the end of February, helped boost inflows into UK equities, registering the eighth largest fund inflow in March.
‘The launch of HL UK Income saw it take net inflows of £263 million in March,’ he said.
Lovett-Turner said targeted absolute return funds also did well in the period with ‘IP Global Targeted Returns and Aviva Multi-Strategy [experiencing] significant inflows’.
Chris Cummings, chief executive of the Investment Association, said: 'Net retail sales reached a record high in March with just over £4 billion flowing into UK authorised funds. We are now starting to see some signs of investor confidence returning following a period of reduced risk appetite in the context of geopolitical and economic uncertainty throughout 2016.'
Top 10 funds by March inflows
|M&G Global Floating Rate High Yield||£643m|
|BlackRock Index Linked Gilt Tracker||£636m|
|BlackRock Corporate Bond Tracker||£553m|
|M&G Optimal Income||£394m|
|IP Global Targeted Returns||£387m|
|Aviva Investors Multi-Strategy Targeted Returns||£372m|
|Vanguard FTSE UK All Share Index||£314m|
|HL Select UK Income Shares||£263m|
|M&G UK Income Distribution||£248m|
|BlackRock 350 UK Equity Tracker||£238m|
Not all funds managed to benefit from the rush into equities and Lovett-Turner said ‘there were continued net outflows - £393 million - from SLI Global Absolute Return after a period of poor performance.’
Top 10 funds by March outflows
|SLI Global Absolute Return Strategies||£393m|
|Aberdeen Japan Equity||£221m|
|M&G European Corporate Bond||£189m|
|Stewart Investors Asia Pacific Leaders||£181m|
|Insight UK Corporate All Maturities Bond||£174m|
|IP High Income||£135m|
|Royal London US Tracker||£131m|
|Royal London Short Term Money||£119m|
|Henderson UK Property PAIF||£112m|
|Lazard Global Equity Income||£98m|
Jason Hollands, managing director of wealth manger Tilney Group, said the inflows marked an end to the ‘prolonged period of outflows from UK equities over the last year as investors have favoured more cautious asset classes such as absolute return funds and overseas markets.’
He said the concerns about the UK stockmarket were fuelled by Brexit but 12 months of from the EU referendum and investors can see it survived a ‘short-lived wobble’.
‘While this data only covers one month it is an important sign of renewed confidence in the UK market,’ he said.
‘When the pound is weak, it is also a sensible move for UK investors to focus on sterling assets. I would expect confidence to improve further if the general election results in a more commanding Tory majority.’
Last year’s shift to large companies with high overseas earnings has been pulled into focus by a weaker outlook for oil prices and a potential sterling recovery and Hollands said ‘investors might want to once again consider funds that invest across the broader market including mid-caps and smaller companies again’.
‘Some of our top picks for best of British funds...include Liontrust Special Situations , Evenlode Income , Standard Life UK Equity Income Unconstrained and the smaller company focused Unicorn UK Income fund,’ he said.