UK investors pumped more money into passive funds in the third quarter of 2023, the latest edition of the Pridham Report shows, although active managers such as Baillie Gifford and Royal London Asset Management were winning new money.
Fund groups have been struggling to capture inflows this year, as high inflation and higher-for-longer interest rates eat into retail investors’ wealth, while cash has become an attractive opportunity for the first time in years.
Figures from the Investment Association show there were net inflows of £1.2bn into funds during 2023’s third quarter, despite a net outflow of £1.4bn in September. However, the quarterly inflow was much lower than the £2.2bn taken in the second quarter and the £3.9bn between January and March.
Anna Pridham, editor of the Pridham Report, said: “With savings rates offering a more compelling alternative to financial markets than they have in decades, it is the managers with the right products and the right performance that can attract new investors.”
The report, which tracks fund sales and distribution trends, found that top groups for gross and net retail sales of UK-domiciled funds were BlackRock, Legal & General Investment Management and HSBC Asset Management.
Source: The Pridham Report
All three fund houses offer ranges of low-cost index funds and exchange-traded funds (ETFs).
BlackRock topped both inflow tables, taking close to £7.4bn in gross retail sales over the third quarter and £1.2bn in net retail sales. BlackRock’s best-selling fund was iShares North American Equity Index, which attracted record inflows from retail investors.
The report also found that Royal London Asset Management was the most successful active manager between July and September, thanks to significant demand for its short dated fixed income range.
Royal London Short Duration Gilts and Royal London Short Term Fixed Income were among its bestsellers while the group’s sustainable funds are more resilient than the industry average, with Royal London Sustainable Leaders among the popular ESG funds with retail investors.
Meanwhile, Baillie Gifford has returned to the top 10 for gross retail sales after an 80% jump on new business compared to the second quarter. The report said its best-selling fund among retail investors last quarter was Baillie Gifford European, while Baillie Gifford American has been “a consistent favourite” over the past 12 months.
The net sales ranking saw little change in its makeup, aside from Canada Life entering the leaderboard for the first time after a steady rise in external fund sales as it expands its distribution across the UK retail market.
HSBC Asset Management, Royal London Asset Management and Legal & General Investment Management managed to grow their net retail sales in the third quarter but it was a “challenging” period for many other fund houses.
“Advisers and investors are likely to put new investment decisions on hold until there are signs that inflation has eased and interest rates can come down,” Pridham finished. “However, money within the industry will go on circulating as investors seek out the best funds to meet their needs.”