UK equity income sees £1bn net sales in July

27th August 2014

UK Equity Income was the best-selling mutual fund sector in July with net retail sales of £1.0 billion out of total sales of £1.9bn. Tracker funds net retail sales highest on record with net retail sales of £532 million.

Equity continued to be the best-selling asset class by far in July with net retail sales just over the £1 billion mark, boosted by sales of £1.0 billion through the UK Equity Income sector, no doubt led by sales of Neil Woodford’s new fund. This was the sixteenth consecutive month that equity was the best-selling asset class.

Mixed Asset was the second best-selling asset class with net retail sales of £390 million. Property was the third best-selling asset class with net retail sales of £304 million.

The UK was the best-selling region for equity funds with net retail sales of £678 million, boosted by net retail sales of £1.0 billion through the UK Equity Income sector. Asia equity funds were the second best-selling with net retail sales of £203 million, the highest for these funds since January 2013. Global and Japan followed with net retail of £163 million and £80 million respectively. Both North American and European equity funds saw outflows of £30 million and £48 million respectively.

Laith Khalaf, senior analyst, Hargreaves Lansdown says: “Last month we saw the Woodford effect propel UK Equity Income to the top of the sales charts. We suspect this month we are seeing a ripple of that effect, as coupon-clipping investors in the Invesco Perpetual High Income fund stayed for the ex-dividend date on 1st July, then switched across to Woodford’s new fund. Indeed it is notable that the worst selling sector in July was UK All Companies, the sector in which the Invesco Perpetual High Income fund now sits.

“Passive funds have also seen record inflows as investors focus on costs and performance. We have noticed this too with investor interest in our new core tracker range of preferred passive funds. We expect the UK market to gradually polarise into low cost passive funds on one hand, and active managers with a proven track record on the other. The middle ground hitherto inhabited by the closet tracker is being eroded, as investors become more savvy and demand outperformance from their active managers.”

Edward Johnson, manager at Willis Owen, says: “The surge in ISA sales compared to last July supports our prediction that we would see a huge influx of money into the New ISA. It seems people may be transferring funds from other savings to make the most of the increased £15,000 allowance. In fact, based on a poll of our customers, we think there could be as much as £3.9bn extra being invested in ISAs over the rest of the financial year1.

“At Willis Owen we’ve seen that the ‘Woodford effect’ shows no sign of fading, with sales of his new fund almost four times as large as our next most popular fund in July. The pattern looks to have been replicated nationally, with the UK Equity Income sector doing well. But we think this is also thanks to continuing growth in the UK economy. In contrast, sales of European equity funds slid off the list of top selling sectors, with troubles in Ukraine and sanctions from Russia putting off more cautious investors.”

FUNDS UNDER MANAGEMENT AND NET SALES
Funds Under Management Net Retail Sales Net Institutional Sales
July 2014 £806.5 billion £1.9 billion £690 million
July 2013 £745.5 billion £2.4 billion £792 million

NET RETAIL SALES OF EQUITY FUNDS BY REGION

Region Net retail sales
in July 2014
Average net retail sales
for previous 12 months
UK £678 million £498 million
Asia £203 million -£33 million
Global £163 million £306 million
Japan £80 million £75 million
 North America -£30 million £1 million
Europe -£48 million £203 million

 The top five best-selling IMA sectors for July 2014

UK Equity Income with net retail sales of £1.0 billion.

Property with net retail sales of £304 million.

£ Strategic Bond with net retail sales of £274 million.

Mixed Investment 20-60% Shares with net retail sales of £238 million.

Asia Pacific Excluding Japan with net retail sales of £198 million.

The worst-selling IMA sector for July 2014 was UK All Companies for the second consecutive month with a net retail outflow of £230 million

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