While October wasn’t as tough for UK funds as September, it was far from plain sailing.
According to Morningstar data, UK-domiciled funds saw £5.5 billion in net outflows last month, continuing a streak of net outflows lasting six months.
The latest report from Morningstar’s manager research team reveals equity and allocation funds drove outflows, with withdrawals worth £2.9 billion and £2.8 billion, respectively. This is the largest outflow for allocation strategies in over 10 years.
Meanwhile, it was also the seventh month of outflows for equity funds. In the past 12 months, investors have redeemed £28 billion from the category, which is worth about £787 billion in total.
Still, the outflows were not as bad as September, where we recorded withdrawals of £11.25 billion – the biggest outflow in 10 years. Equity funds alone accounted for £8 billion of the total that month, eclipsing the August record of £5.2 billion.
Onto more positive news: unlike last month, some categories did come back into inflow territory, and they included fixed income. With modest inflows of £308 million, it’s recouping some of the £659 million outflows in September.
Things do get a little more nuanced when we look at the segments within the different bond categories. £470 million was added to the GBP Corporate Bonds category, making it the third most popular overall, while Sterling Hedged Global Flexible bond was the third most unpopular with outflows of £1.25 billion.
Sustainable funds are also back in positive flow territory. Those categorised as sustainable attracted £2.7 billion, while those without that distinction had £8.2 billion in outflows.
Passive strategies also saw record numbers: these normally-popular vehicles had their largest net redemption in over 10 years. But despite seeing investors withdraw £1.6 billion, they have attracted £2.3 billion over the past 12 months. Active funds, on the other hand, have lost a whopping £20.9 billion over the same period – and £3.9 billion in October alone.
As mentioned, GBP corporate bond funds proved popular – in fact, the category saw its largest inflow since June 2020. HSBC Corporate Bond, the fifth most popular fund of the month, alone contributed £210 million to the net £470 million that went into the category.
Meanwhile, the GBP flexible allocation category, home to all five of the funds with the largest outflows in October, recorded its largest outflow in over 10 years: £2.33 billion. Least popular of all was Baillie Gifford Diversified Growth with £452 million in net redemption.
For Baillie Gifford, the suffering doesn’t end there either. With almost £9 billion in outflows in 12 months it’s been a difficult year for the Scottish fund house, and October provided the highest net outflow in over 10 years, at £1.95 billion. It also had one more fund in the bottom five: Baillie Gifford Multi Asset Growth saw outflows of £371 million.
Abrdn’s luck, however, changed last month. Like Baillie Gifford, the group has struggled with large outflows all year. The company’s shares have also been under pressure, attracting the attention of short sellers, and in a further blow, it was demoted from the FTSE 100 in late summer. But, it accounts for two of the most popular funds in October – abrdn American Equity Tracker and abrdn Asia Pacific ex-Japan Tracker. Plus, it saw its largest inflow in over a year, totalling £752 million, and was the most popular fund group overall. For more on Abrdn's likely re-entrance to the FTSE 100, keep an eye on our site.
Following suit were Legal & General and Royal London, with £526 million and £389 million net subscriptions respectively. The latter had the most popular fund of the month, which accounted for much of the total inflows: Royal London Short Term Money Market had £383 million in inflows.
