Fundsmith hit with outflows as active funds cede ground to passives

But Royal London was hit hardest as investors pulled over £4bn from active strategies in March

Terry Smith Fundsmith


Terry Smith’s Fundsmith Equity suffered the fifth-worst net outflows of any UK-domiciled fund in March, according to Morningstar’s UK Fund Flows report, forming part of a £4.43bn sell-off of active strategies.

Smith’s (pictured) £23.5bn fund generated a return of 3.8% in March, and it is up nearly 7% year-to-date, but this did not deter investors from pulling net £176m over the same month. Between 1 January and 14 April, net £463m was withdrawn from the fund.

Morningstar’s report, which covers only UK-domiciled open-ended funds, and not ETFs, found Royal London bore the brunt of the month’s redemptions, and three of its strategies, including two short-term fixed income funds, were the worst hit by outflows.

Funds with largest net inflows and outflows

March 2023YTDTotal assets
Royal London Short Term Money Market Fund£279m £360m £5.4bn
HSBC FTSE All-World Index Fund£236m£595m£3.0bn
iShares North American Eq Idx Fd (UK£221m£603m£7.4bn
abrdn UK Sustainable and Resp Inv Eq£199m£198m£0.25bn
Vanguard FTSE Dev World ex-UK Eq Idx Fd£196m£163m£12.2bn
Royal London Japan Equity Tilt Fund-£861m-£864m£0.3bn
Royal London Short Term Fixed Inc-£662m-£745m£4.5bn
Royal London Short Term Fixed Inc Enh-£417m-£475m£1.7bn
iShares Overseas Govt Bd Idx Fd (UK-£285m-£242m£3.0bn
Fundsmith Equity Fund-£176m-£463m£23.5bn
Source: Morningstar. Data as of 14 April 2023

In all, net £1.4bn was pulled from Royal London’s UK-domiciled strategies, representing its second-largest outflow in over five years. The struggles also continued for Baillie Gifford, which suffered nearly £480m of redemptions.

Vanguard and BlackRock topped the table in terms of inflows for the month, with Abrdn and Legal & General also continuing to attract new money.

Estimated net flows for the top 10 Fund Groups (UK-Domiciled Funds)

Fund groupsMarch 2023 YTD Total assets
BlackRock£396m £567m£177bn
Aviva £90m-£377m£78bn
Royal London -£1,443m-£928m£66bn
Legal & General £215m£136m£58bn
Abrdn £267m£352m£51bn
Vanguard £463m£681m£50bn
Fidelity International -£97m-£671m£47bn
Schroders -£38m-£166m£35bn
Baillie Gifford -£479m-£1,669m£32bn
Columbia Threadneedle -£229m-£690m£29bn
Source: Morningstar. Data as of 14 April 2023

In all, active funds have suffered redemptions of almost £8bn since the start of 2023, while investors have added £4.3bn to passives over the same period.

However, at £835bn, active funds still hold more than twice the assets than their passive peers.

Total estimated net flows

March 2023YTDTotal assets
Active -£4.4bn-£8.0bn£835bn
Source: Morningstar. Data as of 14 April 2023

All major asset classes saw withdrawals in March, according to Morningstar’s data. Money market funds came off worst, as investors pulled an estimated net £1.36bn, while equities and fixed income sustained withdrawals of £641m and £495m, respectively.

Investor appetite for fixed income has waned considerably since January and February, when the asset class experienced near-record inflows.

Global and US Large-Cap Blend Equity proved the most popular Morningstar categories of the month, receiving inflows of £966m and £777m, respectively, while the UK Large-Cap Equity, GBP Government Bond, and UK Equity Income categories were third, fourth, and fifth worst-hit by outflows.

See also: Investors pull £1.2bn from UK equity funds in March

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