Net sales in June may have been positive but the underlying data shows investors are moving around a lot and, in general, show a growing inclination away from investments.
The IMA’s report notes that June’s net retail sales figures for both equities and bonds were less than their monthly average of the past year.
Its figures also reveal that seven of its 17 equity-based sectors saw net redemptions from intermediaries at the start of the summer, while two if its six bond sectors saw outflows. It was the same situation in May. This compares to June of last year when four of the 17 sectors and none of the bond groupings were in negative net sales territory.
This list excludes Absolute Return, Managed and Property funds as well as platform sales.
Changing sentiment due to market uncertainty shows investors are largely undecided about which way to move. For example, in February the IMA reported North American funds hit a record sales high but by May they were the worst selling area with net redemptions of £176m.
European smaller companies may have been one of the strongest fund arenas over the past six months but it didn’t stop the sector from being the worst selling area in June.
It’s not just intermediary fund flows that show such uncertainty. Three months ago 12 of the 17 equity-based fund groups were in net negative territory from direct investors while four of the six bond sectors were. In June the trend continued, with 11 of 17 seeing net outflows and half of the bond sectors.
In addition, institutional funds experienced net outflows of £616m over June, the IMA reports .
Barings’ recent quarterly investment barometer, a survey of intermediaries, highlights the growing investor nervousness and attributes it to the continuing sovereign debt crises.
The prospect of a second banking crisis has also become a prominent cause of concern for investment professionals with 41% citing this as one of the biggest global challenges of the next six months. This is well up from 15% who cited it as a concern in Baring’s last survey.
The appeal of global mandates
With so much uncertainty then, why are investors in general seeking out global equities?
For one, that is where a lot of the resource funds are now housed along with a growing list of global income funds. FE Analytics data shows that almost 80 funds in this sector have been added in the past five years alone.
Barings’ survey also shows global is benefiting from the appeal of greater diversification in order to navigate the current levels of market volatility. That said, it also notes there is a growing trend towards more clients being advised to de-risk their portfolios (up to 34% from 27% in the last quarter), which reflects the growing macroeconomic concerns investors are facing.
Global funds may be the optimal place to house at a time of rising investment hesitation. However, as always fund selection remains key. While the trends of income and resources continue, many funds in this space have yet to prove their worth.
The broadening sector constituents is also leading to widening performance variance. Over 12 months to 3 August, the best performing fund in the IMA’s Global sector, First State Global Resources, is up 24.04% while the worst, Allianz RCM Global Eco Trends, has fallen 3.39%.
With this area of the market attracting so much attention, performance consistency will be key to avoiding further investor disappointment at a time when it appears it’d take little to scare them away from funds altogether.
