UK fund flows plummet in 2016

UK fund flows fell to less than a third of their size between 2015 and 2016 amid the post-Brexit property funds fallout and extremely low equity appetite, data from the Investment Association shows.

While funds under management increased by £117bn in 2016 to over £1tn, retail sales dropped to £4.7bn from £16.8bn in 2015.

Equity funds saw the most outflows for the year at £8.2bn, followed by the property sector with £2bn. In 2015, both sectors saw sales of £7.8bn and £2.7bn respectively.

In December, the downturn of the property sector seems to continue with £84m outflows, following 11 months of almost consecutive outflows. Equities, instead, saw positive flows of £570m for the month.

Meanwhile, tracker funds flows more than halved in December dropping more than £660m compared to the previous month despite funds under management hitting an all-time high of £141bn over 2016.

In December tracker funds saw inflows of £528m, a drop of 55 per cent from £1.2bn in November, which was the best-selling month for these funds over last year.

Trackers saw net retail sales of £4.9bn in 2016 down from £6.7bn in 2015.

All retail funds attracted £2.6bn in December, up from £1.5bn in November and £1.4bn in December 2015.

Mixed asset funds saw the largest sales at £733m, followed by fixed income (£611m).

UK equities flows, which wee back in positive territory in November for the first time after 10 months of outflows, were also positive in December with £168m net inflows.

Investment Association chief executive Chris Cummings says: “Despite a slowdown in net retail sales in what was an extraordinary and challenging geo-political year, the UK asset management industry continued to grow strongly and provide value to investors, savers and pensioners across the world.

“Funds run by our members for UK investors grew by more than £100bn in 2016, representing a significant contribution to people’s wealth and pensions, as well as the UK economy as a whole.”

Fund market specialist Alastair Wainwright adds:”Despite global stock markets performing well over the year, retail investors sold out of equity funds. Property funds also suffered as advisers and wealth managers moved away from the sector.

“Targeted Absolute Return was once again the best-selling sector with advisers and discretionary wealth managers driving flows into those funds. Money Market funds also benefited from the regulated advice sector with assets growing by 40 per cent in 2016 due to increased allocations to cash. The UK All Companies sector experienced the largest outflows but the sector’s funds under management grew over the year as UK equities performed well.”

For the first time over 2016, the Europe Excluding UK sector was the worst performing sector with more than £3.1bn leaving the funds in the sector throughout the year.

According to the IA, excluding last year, it was the worst performing sector only in 2008 and 2009.