The asset classes driving the cash flow boom in the UK

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Investments in UK retail funds this year are set to break the record set in 2017.

Just over £ 28.9bn was invested in UK retail funds in the first seven months of 2021 on a net basis, up from a high of £ 48.6bn for all of 2017 , according to data from the Investment Association.

Net sales of retail funds tripled in November last year as successful trials of the first Covid vaccines were announced, and inflows have remained strong since then.

Around £ 3.5bn was invested in May this year, with £ 4.4bn in June and £ 4.8bn in July.

Laith Khalaf, financial analyst at AJ Bell, said there was an air of economic optimism about the global economy since the start of the year.

” There is [also] fears of inflation, and if you are afraid of inflation, you have to invest in real assets like stocks, ”he said.

“We also have very low interest rates as a backdrop. We also know that a good number of people were able to put a lot of money aside last year and they are sitting on piles of money, so there is probably a dry powder effect there as well. .

Tom Sparke, investment manager at GDIM, agreed.

“After the 18 months we’ve had there’s a lot of accumulated savings that people are finally starting to do something with,” he said.

“People are going out and seeing their advisers for the first time in a long time and they will feel more confident about [invest], especially if they have heard that the feedback over the past year has been fantastic. “

He added that the markets continued to offer good value and earnings were sustained.

“A lot of companies that we think could struggle in terms of profits are still doing well and monetary policy is still loose,” he said.

Sector performance

Global funds topped the list so far this year with net inflows of £ 7.7bn, with inflows of over £ 1bn in February, March and April, and again in June .

The Mixed Investment 40-85% Shares sector recorded the second highest level of net inflows, with £ 5.1bn invested so far this year.

Khalaf said there are a number of reasons behind the popularity of global funds.

“[Global funds are] kind of a first port of call for an investor because it diversifies you across the entire global market, even though two-thirds are actually in the United States, ”he said.

“There are [also] some very large and popular funds in the global sector including Fundsmith, the Baillie Gifford line of funds and Lindsell Train Global Equity, which have a very strong client base and have performed very well.

He added that the other factor that will have contributed to the success of global funds was the ESG trend.

“A lot of investments are made in funds, and a significant proportion of those have gone to ESG funds, and the biggest of them tend to be global funds,” he said. declared.


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