Ollie Smith: Welcome to another Morningstar fund flow digest. I'm Ollie Smith, Morningstar's new UK editor, and joining me to discuss where the U.K.'s money is going and flowing is Bhavik Parekh, manager research analyst here at Morningstar.
Bhavik, could you just give me an overview of what's been going on in the last few months?
Bhavik Parekh: Yes. So, in the last few months, really, we've seen a repeat of the trends we saw earlier in the year, well, with a few notable exceptions. One, European equity funds, they've seen some inflows, and similarly, U.K. equity funds have seen less outflows. So, still outflows, but less so mainly in the large cap areas. And then, emerging market equities, as you can imagine, given the performance they've seen outflows, whereas they had inflows early in the year, and government bonds are the same, probably a reflection of interest rate expectations.
Smith: Sure. And what's going on with the ever-popular multi-asset space?
Parekh: So, with the multi-asset funds over the last 12 to 18 months, we've seen a lot of inflows, and in fact now the assets are roughly equal to those in the fixed income funds which is fairly remarkable. But having said that, the last quarter was actually the lowest inflow since the middle of last year. So, slowly, interest has been waning but still pretty strong, and I think part of that is driven by IFAs but also asset managers have been really keen to push these funds, so that's helped to grow the assets there.
Smith: Sure. And just on active/passive, what's the current split roughly, do you reckon?
Parekh: So, active funds, they did quite well in Q3. Part of that is the multi-asset funds as we've just discussed, but also sustainable funds. But on the year as a whole, it's fairly equal split. So, active funds not roaring ahead yet.
Smith: Sure. Just wanted to discuss fund houses with you. Last year, we saw some fund houses doing phenomenally well. People like Baillie Gifford perhaps starting to rival the Goliaths of BlackRock and Vanguard. Perhaps there was a new trend there. But who is doing really, really well at the moment and in the last three months?
Parekh: Well, Baillie Gifford still for the year so far, is still on the top of the leaderboard. So, they kind of continued their impressive run. But last quarter it was actually Liontrust that had far and above the most inflows, really driven by again multi-asset sustainable funds in their Sustainable Future range, which those funds have been extremely popular this year.
Smith: Sure. And who is not doing so well? Is Invesco still struggling to make up the numbers?
Parekh: Yes, unfortunately Invesco still are propping up the table, but it's really that the Global Targeted Returns strategy that's seen all the outflows. There have been some inflows in some of their funds, for example, the European Equity Fund this year. But yeah, still unfortunately at the bottom of the table. M&G also this year and over the past couple of months has seen outflows. We saw big outflows from the Property Fund early in the year, then also some from the Global Dividend Fund, and more recently, from some of the bond funds. So, they've had, I guess, a more difficult time of it as well.
Smith: Great. And then, finally, I wanted to ask you about COP26. We're days away from what's been billed as the most important climate conference of our lifetimes. But is there any relationship between that and flows into sustainable and ESG strategies? Or is it just not hitting the mark there?
Parekh: Well, I would say probably COP26 is not going to make that much difference because of the fact that sustainable funds have been so popular. I don't think an event like that's going to make that much difference. So far, the first nine months of the year, we've seen $30 billion net into sustainable funds, which if you considered the market as a whole is only $20 billion. That means that sustainable funds are taking market share as well as seeing new money. I guess that the bond potential headwind we've seen is growing concern over greenwashing. But this week the government released some more guidance on sustainable disclosures which should hopefully reduce those concerns and allow investors to make better choices which can only be a good thing.
Smith: Bhavik, thanks so much for joining me. Much appreciated. Check out Morningstar.co.uk for all your investing and fund information. Until next time, for Morningstar, I've been Ollie Smith.
