Latest statistics from the Investment Association (IA) revealed multi-asset funds took in £1bn during the month, compared with outflows of £136m and £235m for equity and fixed income funds, respectively.
The outflow from fixed income in February reveals a striking reversal of fortune for the asset class over just one month after a net inflow of £1.6bn in January – and compared with a monthly average inflow of £1.2bn for last year.
Elsewhere, net equity fund sales turned negative for the first time since January 2017, with an outflow of £136m. This compares with an inflow of £986m in January.
Investors spooked
Investors were spooked in February when US markets sold-off after strong employment figures caused concern that the Federal Reserve will need to raise interest rates higher than expected.
Fixed income was hit hard by negative net sales of -£274m in the Corporate Bond and -£115.7m in the Global Bond sectors.
UK equity funds were also hammered, experiencing a net retail outflow of £510m during the month. The worst-selling sector was UK Equity Income with an outflow of £306m.
Market agnostic
Despite a smaller net flow than in previous months, Strategic Bond was the best-selling sector during the month, with net retail sales of £346m. This was followed by Mixed Investment 20-60% Shares with £258m and Mixed Investment 40-85% Shares with £239m.
Alastair Wainwright, fund market specialist at the IA, said: “Investors in mixed asset funds tend to be agnostic to short-term market events as asset allocation is in the hands of their fund manager.”
Europe, Asia and Japan were the favoured regions for equity exposure during the month, taking in £216m, £197m and £125m of net retail sales respectively.
However, North America and Global funds experienced outflows of £31m and £66m, respectively.
On the side-lines
Adrian Lowcock, investment director at Architas said: “The concern in bond markets led to a long overdue sell off in equity markets. While markets recovered quickly from the sell-off in February, the return of volatility has been a reminder to investors not to be complacent.
“Investors drop in confidence about the direction of equity and bond markets is clearly reflected in the most popular asset classes with £455m being put on the side-lines through money market funds. Some investors are clearly choosing to protect the gains made.”
Overall, net retail sales into all funds were £1.16bn, down from £3.7bn in January. The monthly average inflow in 2017 was £3.9bn.
Total funds under management stood at £1.2trn in February, slightly down from January’s £1.22trn.
Chris Cummings, chief executive of the IA (pictured), said: “UK authorised funds attracted £1.2bn from retail investors and £2bn from institutional investors in February, despite difficult market conditions. Funds under management fell slightly, due to negative market returns, but still stand at more than £1.2trn.”
