M&G stalwarts dominate best-sellers list
Defensive funds have experienced the highest net inflows this year, while Equity Income products have maintained their popularity.
Four of the 10 best-selling funds of 2012 are run by M&G, with defensive portfolios the favoured option for risk-averse investors.
According to our inflows data, the FE five crown-rated M&G Optimal Income fund has been the most popular fund this year, attracting £1.76bn – £300m more than second-placed Standard Life Global Absolute Return Strategies.
M&G Global Dividend is the only other fund to have attracted more than £1bn of investors’ money, receiving a total of £1.07bn in inflows.
Two M&G fixed income funds also feature on the list, with M&G Strategic Corporate Bond in fifth place and M&G Corporate Bond in eighth.
Ben Seager-Scott, investment analyst at Bestinvest, says it is no surprise that investors favour M&G given the economic environment.
"They have a track record of being less aggressive on both their global equity income and bond funds, and in times of uncertainty what you want is that knowledge that they are not going to go off and do something stupid," he commented.
Top-selling funds over 6-months
Source: FE Analytics
Seager-Scott highlights the popularity of the Equity Income sector as evidence of the trend for caution among investors, claiming it is a response to the depressed economic climate.
"Given how long the crisis has been rolling on for I think investors have come to realise that you can’t just wait for the markets to stabilise as in the meantime you are going to lose money to inflation if you keep it in cash, so you have to get back in," he said.
"Whether investors are buying income on a total return basis or seeking income I am not sure; I suspect it is both."
"The good thing about income funds is the dividend gives you a little bit of a buffer if the markets fail completely."
He adds that the relative popularity of corporate fixed income is explained by the weaknesses with government bonds.
"In the past we have seen yields go negative in government bonds, and even now they look expensive. The spread of corporate bonds over government bonds is attractive," he explained.
Returns have been modest for the most popular portfolios so far, with M&G Optimal Income heading the list with gains of 4.63 per cent. However, the relatively defensive nature of the majority of the funds means investors are likely to be satisfied with the results.
Ironically, only the Newton Real Return fund, which sits in the Absolute Return sector, has fallen in value, losing 0.4 per cent – exactly the same as the FTSE 100 as of close-of-play yesterday.
Performance of funds in 2012
Source: FE Analytics
Newton Real Return is one of seven funds in the top-10 that is run by an FE Alpha Manager, with M&G’s offerings accounting for another four. Moreover, six of the 10 funds have an FE crown-rating of five.
At the other end of the scale, M&G American is among the funds shedding the most money in the year-to-date, with the third-highest outflows.
Threadneedle Short Dated Corporate Bond heads the list, having lost £1.192bn to withdrawals, while Aberdeen World Equity is second with outflows of £850.36m.
Other notable funds that have suffered outflows of more than £150m over the six-month period include FE Alpha Manager Graham French’s M&G Global Basics, Anthony Nutt’s Jupiter Income, and Mark Lyttleton’s BlackRock UK Absolute Alpha fund.