While the stock market has been rising, supposedly pushing investors into equities, and industry commentators have been speaking of a move back into shares, our data suggests that income-paying bond funds and absolute return portfolios remain the most popular.
Investors also continue to favour emerging markets for equity exposure, despite a month in which the FTSE All Share has soundly beaten the MSCI Emerging Markets and MSCI Asia ex Japan benchmarks.
Performance of indices in 2013
Source: FE Analytics
FE Alpha Manager Richard Woolnough’s £11.2bn M&G Optimal Income fund attracted the most new money of all retail funds in the past month, just as it headed the list over the past three months.
The fund saw net inflows of over £350m in the month, and £1.5bn over three months, despite the fact that performance has slipped over the past year.
Over the long-term its track record is extremely strong: it is the second-best performer in total return terms over five years, having made 69.11 per cent while the average fund in the sector has grown by 34.63 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
The fund is also a top-quartile performer over three years, although total returns have slipped below the sector average over the past 12 months, during which time the fund has grown by 9.66 per cent as the sector has made 10.12 per cent.
Total return may have been hit by a decline in the yield payout on the fund, which FE Trustnet previously reported on. The fund is currently yielding 2.95 per cent, putting it in the bottom quartile of the sector.
The fund seeing the second-highest net inflows is Standard Life Global Absolute Return Strategies, which is still growing at £14.4bn, adding almost £350m in the past month alone.
The fund aims to provide a positive return in all market situations and has proven extremely popular thanks to its steady performance.
Our data shows it has made money in each calendar year since launch, including 2011 when the markets lost money.
It has done this with an annualised volatility score of 5.37 per cent over the past four years, which puts it above the average of the IMA Absolute Return sector, which is 2.86 per cent.
Standard Life GARS is team-managed, but the third most popular fund is, like the first, run by an FE Alpha Manager.
Ian Stewart’s Newton Real Return also sits in the IMA Absolute Return sector, and is in fact the longest-standing fund in that area.
The fund has produced a positive return in each of the last 10 years but one – 2011, when it lost 0.75 per cent.
Its volatility is marginally higher over the past four years than GARS, however, at 6.18 per cent.
The £4.4bn M&G Global Dividend fund attracted approximately £250m in new money over the past month, according to our data, and is the third of the top-four funds to have an FE Alpha Manager – Stuart Rhodes.
The fund is the first equity portfolio on the list and sits in the IMA Global sector, in which it is a top-quartile performer over three years, with returns of 46.27 per cent.
It concentrates on the developed markets, which have done so well in the year-to-date, with 36.8 per cent in the US and 15.1 per cent in the UK.
Switzerland, Canada, Australia and the Netherlands also hold significant proportions of the fund’s money.
The fund is also one of the funds attracting the most money over the past year, however, suggesting it is being used as a diversification tool rather than it is seeing an increase in flows thanks to short-term market conditions.
AWD Chase de Vere’s Patrick Connolly says that it is probably too early to see investors’ behaviour change too much, as they remain wary after years of market turbulence.
"What we are not seeing is a great rush where everybody moves, we are seeing investors gaining more confidence and becoming more bullish and positive, but it’s very fragile and could easily move back the other way."
Baillie Gifford’s Diversified Growth fund – a multi-manager mixed asset fund – saw the next highest amount of inflows, shortly followed by Newton Asian Income, both of which received around £150m.
Cazenove UK Opportunities, BlackRock European Dynamic and Threadneedle American Extended Alpha complete the top-10.
Newly dubbed FE Alpha Manager Julie Dean’s Cazenove UK Opportunities fund has also proved popular over the past 12 months, while the new inflows into the BlackRock European and Threadneedle American Extended Alpha funds may reflect the first signs of more bullish investor sentiment.