Fixed interest funds on the Skandia platform dropped from 16% of net sales in July to -8% of net sales in August, the lowest of any individual asset class. This is in marked contrast to fixed income sales through the early part of 2013. As recently as May fixed interest net sales topped the leader board.
The waning popularity of fixed income has been particularly noticeable in developed market government bonds and corporate bonds. However, sterling strategic bond funds continue to be popular as investors move away from long duration bond funds to those with a more flexible approach in response to the US Federal Reserve’s potential unwinding of the ultra-loose monetary policy that has been in place since the credit crisis.
The statistics from the Skandia platform mirror the most recent set of IMA statistics, which showed the worst-selling sector for July 2013 was the IMA Sterling Corporate Bond sector with net retail outflows of £131 million.
The IMA figures showed the Mixed Investment 20-60% Shares Sector was the most popular and Skandia also found fund flows continue to be strong into the multi-asset sectors. Equities and property also showed strong performance on the platform. Within equities the UK was the top selling region, followed by the Global and North American sectors.
David Hambidge, head of multi-asset at Premier Asset Management, reflects the popular mood when he says that although he believes UK 10-year gilt yields are likely to level off at around 3%, he continues to avoid gilts and is underweight low yielding corporate bonds: "We are dabbling in investment grade credit, but it still represents a tiny part of the portfolio." He prefers UK equity income and, increasingly, commercial property, to deliver yield. He also holds some ‘niche’ fixed income areas such as asset-backed securities.