With the controversial Targeted Absolute Return sector emerging as the best-selling among investors during 2016, according to data from the Investment Association (IA), FE Trustnet can reveal which funds were most added to portfolios during the course of the year.
Despite good news for the Targeted Absolute Return sector, total net retail sales plummeted, falling to £4.7bn at the end of 2016 from £16.8bn recorded during the prior year.
Equity fund sales were hardest hit with £8.2bn withdrawn over the course of the year as worries over the impact of the EU membership referendum on markets and other issues took hold among UK investors.
Top selling IA sectors in 2016
Source: IA
Broadly industry funds under management also rose last year, hitting an all-time high of more than £1trn, up from £928.3bn in 2015.
Chris Cummings, chief executive of the IA, said: "Despite a slowdown in net retail sales in what was an extraordinary and challenging geo-political year, the UK asset management industry continued to grow strongly and provide value to investors, savers and pensioners across the world.”
Alastair Wainwright, fund market specialist at the IA, said fund performance had contributed £104bn of growth to total funds under management with net sales contributing a further £13bn.
He said: “Net retail sales totalled £4.7bn in 2016 with fixed income and absolute return funds attracting the bulk of inflows.
“Despite global stock markets performing well over the year, retail investors sold out of equity funds. Property funds also suffered as advisers and wealth managers moved away from the sector.”
Below we look at the top five sectors and use the FE Analytics Market Intel tool to reveal the funds most increased in user portfolios.
IA Targeted Absolute Return
The sector has divided opinion among investors of all stripes more recently. Over 2016, the average sector fund returned just 1.06 per cent compared with a gain of 7.47 per cent for the FTSE All Share index.
However, with inflows of £5.1bn it was the top-selling sector for the second consecutive year. Net sales were also more than double the £2.5bn reported by the next biggest-selling sector IA Global.
The fund most added to or increased in FE Analytics user portfolios was the Standard Life Investments Global Absolute Return Strategies.
The fund remains a clear favourite with investors, particularly as concerns over the macroeconomic market environment have heightened. However, it made a 2.68 per cent loss over 2016.
Other funds in the sector included the Newton Real Return, Invesco Perpetual Global Targeted Returns, Henderson UK Absolute Return and Old Mutual Global Equity Absolute Return funds.
Source: FE Analytics Market Intel tool
Also making up the top 10 were JPM Global Macro Opportunities, Insight's Absolute Insight, Newton Global Dynamic Bond, Threadneedle UK Absolute Alpha and Premier Defensive Growth.
The sector’s top performers Schroder ISF Emerging Markets Debt Absolute Return and Schroder ISF Asian Bond Absolute Return – which returned 23.77 per cent and 22.36 per cent respectively – were much further down the list.
IA Global
FE Alpha Manager Terry Smith’s Fundsmith Equity saw the most increased allocation to FE Analytics users’ portfolios over 2016.
The five crown-rated £9.3bn fund returned 28.16 per cent over the course of the year compared with a 23.33 per cent gain for the average sector fund.
Joining Fundsmith among the most popular funds in the sector were M&G Global Dividend, First State Global Listed Infrastructure, Rathbone Global Opportunities and Vanguard FTSE Developed World ex UK Equity Index.
Source: FE Analytics Market Intel tool
The top five most added funds included a number of top performers. The M&G Global Divided fund – overseen by Stuart Rhodes, John Weavers and Alex Araujo – was up by 40.75 per cent. The £2.2bn five crown-rated First Global Listed Infrastructure fund, managed by FE Alpha Manager Peter Meany and Andrew Greenup, returned 35.89 per cent.
Rounding out the top 10 were Invesco Perpetual Global Smaller Companies, Old Mutual Global Equity, Artemis Global Growth, M&G Global Basics and Fidelity Global Special Situations.
Sitting outside the top 10 but within the top 20 added funds, was the IA Global sector’s top performing fund First State Global Resources, which was up by 70.85 per cent last year.
IA Short Term Money Market
Money market funds saw a surge in inflows during 2016 as many investors sought to protect themselves from some of the turbulence in the market.
The IA Short Term Money Market was the third best-selling sector among investors during 2016, attracting inflows of £1.8bn.
The most added fund to FE Analytics user portfolios was BlackRock Cash. Other top picks among users include Fidelity Cash and Standard Life Investments Short Term Money Market fund.
IA Sterling Corporate Bond
The IA Sterling Corporate Bond sector saw a huge jump in popularity last year. Having ranked as the 34th most popular sector in 2015, net sales of £1.6bn saw it climb to the fourth most bought sector last year.
Among FE Analytics users, the Invesco Perpetual Corporate Bond was the most popular. The fund overseen by Paul Causer, Paul Read and Michael Matthews returned 5.15 per cent in 2016, compared with a gain of 9.08 per cent for the average sector fund.
Source: FE Analytics Market Intel tool
Rounding out the top five were Fidelity Moneybuilder Income, M&G Strategic Corporate Bond, M&G Corporate Bond and Kames Investment Grade Bond.
The sector’s best performing fund was Aberdeen Corporate Bond with a 10.03 per cent return in 2016, but it failed to top the list of funds most added to FE Analytics user portfolios.