UK Equity Income was one of the few sectors to record outflows in December, a month which saw the second largest monthly net retail sales on record.
The UK funds industry enjoyed a strong finish to 2020, raking in £6.2bn during the month, though this fell short of November’s all-time high of £8.3bn.
But investors had no love for the UK Equity Income sector which suffered net outflows of £501m in December, making it the Investment Association’s worst-selling sector, followed by the UK All Companies sector which leaked £369m.
“For many years, equity income investing was seen as the bedrock of a portfolio with the high dividend yield from UK companies providing a strong and stable underpinning to any portfolio,” said AJ Bell head of active portfolios Ryan Hughes.
“However, the pandemic changed that perception markedly through 2020 with the swathe of dividend cuts, cancellations and postponement form UK companies making investors realise that these high dividends may not have been quite so sustainable after all.”
Global equity funds rake in £1.5bn
Equity funds were the best-selling asset class in December, attracting net retail sales of £2.5bn, buoyed by Global equity sales of £1.5bn.
Despite the disruption from the pandemic early in the year equity funds came out on top for the whole of 2020, attracting £10.4bn, a significant reversal of 2019’s £2.9bn of net outflows.
“December saw a continuation of the strong net retail sales of November, with the fund market buoyed to a positive end-of-year position,” said Chris Cummings, chief executive of the Investment Association.
“Growing positivity around coronavirus vaccines helped boost stock market performance in December which in turn fuelled investor appetite for stocks and shares funds.”
Investors warm toward active funds
Responsible investment funds also performed well, attracting a record £1.1bn in net retail sales in December, in line with recent trends. In the first three quarters of 2020, responsible investment saw record inflows of £7.1bn, up from £1.9bn in the first three quarters of 2019.
Active funds regained popularity, garnering £12.4bn in net retail sales in 2020, compared to outflows of £8.1bn the year before. Active funds saw £5.2bn of net retail sales in December, slightly below the record inflow of £5.4bn in November 2020.
Cummings added: “The fund market accumulated strong sales over 2020 and ends a tumultuous year with record funds under management. Continued economic uncertainty, set against the progress made on a national vaccine roll-out, means we enter 2021 with cautious optimism.”
