LONDON (19 August 2024) – Nearly six in 10 (59%) of the U.K.’s largest funds groups grew net sales in the second quarter – the third straight quarter this figure has exceeded 50%, latest Pridham Report from ISS Market Intelligence (ISS MI) reveals.
In a further sign of improving investor confidence, 43% of the largest funds groups operating in the U.K. registered positive retail net flows during the quarter – the largest proportion since Q3 2021. By comparison, 38% of respondents reported positive net sales in Q1. That number hit a low of 21% in Q4 2023.
The data is taken from ISS MI’s Pridham Report, which monitors sales and asset trends in the U.K. fund market using data supplied by over 40 of the largest fund groups operating in the U.K.
The sharp turnaround in fortunes reported in the latest edition of the Pridham Report suggests an improvement in investor sentiment during the individual savings account (or ISA) season, despite recent volatility in markets.
Benjamin Reed-Hurwitz, EMEA Research leader at ISS MI and lead author of the Pridham Report, says: “There is a sense of guarded optimism among fund groups at the end of the second quarter. Inflows were steady and there has been a slowdown in outflows among the U.K.’s largest fund groups, suggesting that investor confidence is improving.
“Whether that trend continues in Q3 remains to be seen, especially considering the severe market volatility we have witnessed in recent weeks. However, in the past investors have been drawn to equities when interest rates are falling, as they have begun to in Europe and, perhaps, soon in the U.S., too. That may well provide the conditions needed to carry that momentum through to the end of the year.”
While Q2’s top-line sales figures were stronger, passive funds drove most of the positive flow activity. Passive equity funds led the way with over £5 billion in net sales. The five best-selling fund groups in Q2 were all big names in passive investing.
But although passive managers stole the show in Q2, many active managers managed to carve out pockets of success in certain areas right across the market.
JP Morgan Asset Management was the largest mover in the retail rankings, rising to sixth in terms of net sales. JP Morgan’s results were bolstered by the launch of a UK-domiciled version of their Global Focus fund in Q2, which was the best-selling fund by net sales for the quarter and has already surpassed £1 billion in AUM.
Global and North American sector funds continued their dominance in Q2, being the top-selling equity fund sector by gross sales for eight in 10 of the largest equity houses.
Meanwhile, Artemis once again attracted investor cash thanks to its dominant presence in “less loved” equity sectors. Artemis’ U.K. Select fund, a top performer in the sector, helped its parent achieve a 9th place retail gross sales ranking.
In terms of fixed income, in Q2 investors continued to favour Sterling corporate bond funds, which was the best-selling fund sector for eight out of the top 10 best-selling bond fund houses by gross sales. BlackRock, LGIM and Royal London all saw these funds contribute meaningfully to their Q2 results.
Vanguard, a first-time participant in the Pridham Report, led the way in mixed asset fund sales, and ranked second in terms of both gross and net retail sales. Vanguard’s LifeStrategy fund range helped propel the firm’s retail success with the 80% equity option being their best-seller within the product range. With Vanguard’s participation the Pridham Report now covers over £1 trillion in assets.
Reed-Hurwitz added: “While the success of passive funds has put a recent dent in many active managers fortunes, there is a sense that investment opportunities will continue to broaden in the coming quarters, particularly in equity, which will provide an opportunity for many active styles to thrive.
“Changes in demand for active and passive solutions, however, are not only a function of evolving market conditions. It is also a function of today’s cost-conscious environment and the rise of investment gatekeepers in the retail arena. The move to centralised investment propositions and consolidation amongst advice firms has led to investment gatekeepers influencing more and more of where the money is being invested. Consequently, their portfolio construction preferences have become more visible in the fund landscape.
“Adapting to this environment is leading to more partnerships being formed at the entity level between fund managers, gatekeepers and/or distributors, and a refining of market segmentations to better identify the true decision-maker behind today’s investment decisions.”
For more information and to access the full report, visit https://page.issmarketintelligence.com/mi-uk-pridham-report
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