Total net retail sales for the month were £903m, down from £980m in the same period last year, with corporate bond funds in top place absorbing £218m, slightly below the sector’s monthly average of £227m for the previous 12 months.
Next in line in terms of net retail sales was the Mixed Investment 20-60% Shares Sector, which saw inflows of £203m during the month, above its monthly average of £170m in the 12 months prior to July.
Richard Saunders, IMA chief executive, said: “The latest month shows a similar picture to previous months this year, with net retail sales around the £1bn mark and a continued preference for bond funds and mixed funds.
“Investment in equity funds continues overall to be broadly neutral, but our analysis of net retail sales over the last 12 months shows an interesting pattern of investor preferences shifting towards global funds at the expense of the UK, North America and, especially, Europe. This is perhaps not surprising in view of economic news, but the figures are nonetheless striking.”
Global equity income funds were the fifth-best sellers in July, with net retail sales of £103m – more than double their monthly average inflows of £56m since January when the sector was launched.
Platforms increased their market share year-on-year with gross retail sales through UK fund platforms totalling £3.6bn representing 45% of the market, compared to 42% in the same period last year.
Gross retail sales for “other intermediaries” including wealth managers and stockbrokers also increased market share by 3% year-on-year to 44%.
Combined, these increases led to a 6% decline in direct gross retail sales from last year’s figure, representing 11% of market share.
Jason Hollands, managing director at Bestinvest, commented on the continued popularity of fixed income funds: “With interest rates remaining at record low levels, it is unsurprising that investors are chasing the higher yields on offer from corporate bonds but the weight of money flowing into the asset class, combined with a backdrop of low new issuance means that yields have already tightened with well-regarded investment grade funds now yielding less than 4%. This is slightly below yields on offer from many UK equity income funds, albeit the carry higher risk.
“Whereas valuations on parts of the bond market are becoming stretched, equity valuations do not look unreasonable. Dividend yields on stocks are well covered by earnings compared to historic levels, which suggests there may be some headroom for further increases, so for investors with a longer time horizon who can stomach greater volatility, the relative attractions of equity income versus corporate bonds are on the increase.
“We like Threadneedle UK Equity Income, Artemis Income and BlackRock UK Income.”