Fixed income funds rake in £1.4bn in February amid sharp govvies sell-off

UK equity funds see £1bn exodus but small-cap focused vehicles see inflows spike 330% month-on-month

Chris Cummings chief executive IA
Chris Cummings


Fixed income was the most popular asset class in February attracting £1.4bn in net retail sales, despite investors withdrawing £987m from global bond funds as fears of higher inflation ramped up.

Investment Association data found that fixed income accounted for over half of inflows in February which saw savers place £2.4bn into funds in a continued strong start to the year.

The global bonds sector ranked as the worst-selling sector with outflows of £987m as investors embarked on a US government bond sell-off. February saw a sharp spike in bond yields triggered by a rise in market optimism as success vaccine rollouts began to take effect and Biden’s $1.9trn fiscal package boosted hopes of economic recovery.

Asian equities gain favour with investors

Only two regions saw positive flows in February. Asia equities proved popular taking in £638m of inflows, falling just behind global equity fund which was the best-selling region with inflows of £969m.

IA chief executive Chris Cummings said that the “preference for Asian equities continues as the opening up of the Asian economies following the pandemic advances ahead of Europe and the US”.

He added that global equities “remain a perennial favourite as savers looked to spread their risk through globally diversified funds.”

UK equities see £1bn exodus

All other regions saw outflows with UK funds seeing an exodus of £1bn outflows. Europe experienced outflows of £228m, while North American outflows amounted to £94m and £74m poured out of Japan funds.

However, savers looked for opportunities in the small-cap space with the North American smaller companies sector coming in as the fifth best-selling sector with net retail sales of £252m. UK smaller companies also saw a return in popularity as inflows increased by 330% from £33m in January to £142m in February.

Responsible investment funds saw net retail sales of £217m, bringing funds under management to £61bn at the end of the month. Their overall share of industry funds under management was 4.3%.


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