Equities suffered over £20bn in outflows in the UK market during 2023, while fixed income, largely powered by passive bonds, enjoyed over £10bn in inflows, according to the Everything Flows report by LSEG Lipper.
Aggregate flows for the UK fund market felt losses of £57.4bn, with long-term assets bleeding £17.9bn and redemptions from money market funds making up £39.5bn. As many investors prepared for a recession in 2023, bonds pulled in a net £10.6bn in inflows pulled along by passive bonds, which attracted £18.2bn.
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“The 10-year gilt yield finished more or less where it started, at about 360 basis points (bps) – wandering between lows of 300 bps and highs of 474 bps – as investor sentiment as to the trajectory of inflation and base rates caromed around like a bungee-jumping pachyderm, from one inflation print or rate announcement to the next,” the report said.
While faith in bonds flourished, equities tolerated a net loss of £23bn, with equity UK dropping £15.4bn, UK income losing £5.13bn, and small and mid-caps facing outflows of £3.41bn. Sustainable equity inflows, however, brought in £12.25bn, with equity global funds netting £6.29bn.
“It’s been a challenging year for sustainable investments. For example, renewable energy companies, because of their debt-heavy nature, have been punished by elevated rates, and consequently investors have pulled $3.32bn globally from specialist renewable energy funds,” The report said.
“However, in the UK, while conventional funds saw outflows of £72.18bn (£31.9bn excluding MMFs), sustainable vehicles enjoyed inflows of £15.26bn (£14.53bn).”
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By company, BlackRock continued to lead the market with £21.72bn in sales, an increase from 2022’s £18.7bn. In equities, HSBC followed BlackRock with £3.9bn to its £12.04bn, while Vanguard came second in bonds with £3.9bn to BlackRock’s £7.78bn.
In total, net assets across UK mutual funds and ETFs rose from £2.01trn to £2.13trn in the year but still remain below 2021’s peak.
“The cost pressure that asset managers experienced with the decline in assets in 2022 has been relieved…but only a little,” the report stated.
“Pressures to consolidate and save costs are still very much front and centre.”
