Following two years of monthly outflows, UK equity funds landed £533m in May, just ahead of the Woodford Equity Income suspension.
UK equity income funds enjoyed their best month in three years pulling in £316m, Investment Association data shows.
The UK was the best-selling region for equity funds in contrast to Europe funds, which were at the bottom of the tables for the month with £527m net outflows.
In theory, the suspension of the Woodford Equity Income fund on 3 June should be supportive for the next round of monthly figures out from the IA due to the £3.5bn worth of investor money trapped in the fund, said Tilney managing director Jason Hollands.
“Time will tell whether the surge in UK equity fund net sales is partially down to a blip in the timing of reported sales and purchases, or the start of a more durable trend where investors have begun to recognise the value opportunities available in the UK equity market which is trading at a discount to other developed markets,” Hollands said.
Rotation out of growth stocks?
Richard Colwell at Columbia Threadneedle and Adrian Frost at Artemis stood to benefit from Woodford investors seeking a core UK equity income alternative, said Willis Owen head of personal investing Adrian Lowcock. Chelverton, Man GLG and JO Hambro offered UK equity income funds with an all companies approach that could complement core holdings, Lowcock added.
Regarding the pull factors attracting investors into UK equity income in May, he pointed to a rotation out of growth, US Federal Reserve policy pointing to lower bond yields, Brexit noise being relatively quiet compared to earlier in the year and relatively attractive UK dividends.
He said: “It’s hard to see the UK becoming much more unloved than it had already become so some investors are clearly coming back from a valuation perspective and the yields on equity income are looking more attractive. There are concerns about individual companies in that space, such as Vodafone, but by and large there are some healthy yields there.”
‘Overall equity sales remain weak’
UK Equity Income was the fourth most popular sector followed by UK All Companies, which attracted £266m.
Global was the most popular sector but attracted around half the previous month’s flows pulling in £562m. Sterling Strategic Bond and Mixed Investment 40-85% Shares were the next top sectors attracting £386m and £367m respectively.
IA chief executive Chris Cummings said: “Overall equity sales remain weak, with significant outflows from European equity funds and also Asian equity funds, in particular Japan, as the ripple effect of trade tensions between the US and China started to be felt. In contrast, mixed asset and bond funds attracted strong inflows.”
