IA statistics released this morning show that September was a record month for retail fund sales, and 2017 is already a record breaking year with three months to go, clocking up £33.7 billion of net retail fund sales in the first 9 months of the year.
Commenting on the figures, Laith Khalaf, Senior Analyst, Hargreaves Lansdown:
‘It’s been a bumper year for fund sales across the industry, after a very disappointing 2016, which suggests investors are returning to the fray in large numbers.
Sales of bond funds have picked up significantly over the summer months, which is bizarre given the heightened expectations of rising interest rates over this period. Much of this money has flowed into strategic bond funds, which in theory have the flexibility to shelter investors from the worst ravages of rising rates on fixed income prices, if the manager makes the right calls.
Sales of UK equity funds have been abysmal in 2017, continuing last year’s trend, which suggests a high level of pessimism towards the domestic stock market. Global and European Equity funds have really taken up the slack though, as we have seen a resurgent global economy and Europe picking itself up by its bootstraps. Sales of Japanese and North American equity funds have also made positive contributions to the total so far this year, though Asian fund sales are still going backwards.
No doubt the malaise affecting UK fund sales is in large part Brexit-related. Almost half of the population voted to remain in the EU, and it’s natural to expect a large portion of this group to be bracing for an economic downturn in the UK. However while the Brexit negotiations continue to go from pillar to post, the UK economy has actually held up rather well, to such an extent the Bank of England has seen fit to raise interest rates for the first time in over a decade.
No-one knows what the economic impact of Brexit will ultimately be, but it’s worth bearing in mind the UK stock market has globally diversified income streams, and for many domestically focused companies, there’s already a fair amount of doom and gloom baked into share prices.
What’s more, the UK is home to some of the most talented fund managers around, so investors shouldn’t ignore their home market when it comes to building a portfolio.’