Investors were not convinced of the post-Brexit buying opportunities in the third quarter, despite the impressive rebound of the FTSE 100 and FTSE All-Share indices, which shot up 6% and 7%.
The findings from Fundscape reveal net flows into fund platforms dropped off to £8.6bn, which is the lowest volume recorded since the first quarter of 2013 after the retail distribution review rules were put into place.
Even Aegon, the strongest platform in terms of net sales over the period, only had £300m in new net flows out of the £1.6bn in sales the group garnered.
Fund platforms also missed the mark in terms of gross sales, which fell to £21bn and were the lowest they’ve been since the third quarter of 2014.
While sales over the summer months are historically weaker than other periods in the financial calendar, the flows seen this year were even lower than expected, said Fundscape CEO Bella Caridade-Ferreira.
“Stock markets were soaring, but the UK’s uncertain economic outlook made investors extremely cautious with their investments,” she explained.
Although the Fundscape report showed platforms, like Hargreaves Lansdown and Cofunds, experienced “strong” asset growth across the board, consolidation in the industry accounted for a good chunk of the major growth of the top platforms.
Standard Life, for instance, was the fourth highest platform in terms of assets under management at £42.3bn. Factoring out the 46% growth in AUM following its acquisition of Elevate, resulted in a more modest growth of 5%.
Similarly, Aegon’s 26% spike in assets, which took it up to £11.2bn, was largely the result of transferring legacy accounts from its newest acquisition, Cofunds, to its platform.
There was another noticeable trend in this quarter’s data, namely, that four of the top platforms are owned by insurance companies. Given that 73% of net industry sales (£6.3bn) were derived from pension vehicles over the quarter, Caridade-Ferreira said this winner’s circle is hardly surprising.
“We expect the precautionary motive to save, the low interest rate environment and pension freedoms to keep platforms broadly on the right track,” she said. “However, the business environment in 2018 will be tough and competition for business will be fierce. In this hostile and volatile environment, further consolidation is to be expected and insurance companies are likely to lead the way.”
