Since last summer’s sell-off, the majority of investors have preferred to back "safe haven" sectors, but an uptick in sentiment has seen increased demand for risk assets.
Equity-focused sectors saw net retail sales of £541m in September, compared with average net outflows of £65m a month over the past year. The last time equity was the best-selling asset class was in August 2011, when net retail sales were £552m.
Global Emerging Market funds took the lion's share of equity sales – £139m in total – but there were also notable inflows for IMA Global Equity Income [£137m] and UK Equity Income [£134m]. All three sectors made it on to the top-five best-sellers list.
IMA Absolute Return and Sterling Strategic Bond took the number-one and -two spots, with inflows of £193m and £144m respectively.
Five best-selling sectors in September
| IMA Sector | Ranking in Sept 2012 | Net retail sales (£m) | Ranking in Aug 2012 |
| Absolute Return | 1 | 193 | 8 |
| Strategic Bond | 2 | 144 | 1 |
| Global Emerging Markets | 3 | 139 | 10 |
| Global Equity Income | 4 | 137 | 3 |
| UK Equity Income | 5 | 134 | 24 |
Source: IMA
September was a good month in general for fund inflows, with retail sales hitting £1.1bn over the period.
This is particularly impressive given that in August fund sales were at their worst since the depths of the financial crisis in 2008.
Funds under management in September 2012 reached £629bn, compared with £550bn in September 2011.
In terms of gross retail sales, equity funds took a 49.9 per cent share in September 2012. Fixed income was the second best-selling asset class, with net retail sales of £320m – the lowest figure since September 2011.
European equity funds experienced their first net retail inflows last month – £150m – since May 2011.
However, the UK was the least popular region for equity sales, with outflows of £51m as a result of a poor showing by IMA UK All Companies yet again.
It experienced net outflows of £206m in September, making it the worst-selling sector, which has now been the case in eight out of the last 12 months.
Jason Hollands, managing director of communications at Bestinvest, is relieved that investors are finally biting the bullet and rushing out of expensive bond sectors and into cheaper equity markets.
"Significantly, this was the first month in a year when equity fund sales out-stripped fixed income sales, demonstrating that investors have started to notice the strong rebound in markets since June," he said.
"With government bonds now yielding less than inflation, and corporate bond yields having also tightened, we think equities deserve greater attention from investors. Equities represent better value than fixed income in our view and yields are also more attractive."
"Importantly, the unprecedented levels of concerted action by central bankers around the globe to stimulate the financial system have reduced some of the near-term risks of investing in equities."
Although Hollands is cautious on China, he says emerging market equities look particularly good value and also thinks there is a strong case for backing battered European markets.
"While it is understandable that investors are shy of domestically orientated eurozone businesses, especially those focused on its troubled periphery, there are many globally focused European-listed businesses that have been marked down almost indiscriminately," he added.
"Current valuations potentially represent an attractive entry point."