Passive strategies across a range of asset classes emerged as some of the biggest winners of 2019 as most markets rose following a subdued start to the year, according to data from FE Analytics.
An uncertain start to the year gave way to some more positive conditions in 2019, as the Federal Reserve stepped in to support markets with several rate cuts.
A potential end to the stand-off between the US and China also began to appear on the horizon, reassuring those expecting a full-blown trade war.
Meanwhile, in the UK, uncertainty over Brexit began to dissipate with a landslide election victory for Boris Johnson’s Conservative party.
As such, Trustnet found out which funds had taken the most in inflows during 2019 using FE Analytics’ Market Movements tool.
And the picture that emerged will not be a great surprise to many investors.
As the latest data from the Investment Association has shown, UK investors’ love affair with passive funds is far from over with index trackers now accounting for around 20 per cent of total funds under management.
The strategies have been aided by the market conditions of the post-global financial crisis era that have lifted all asset classes over the past decade.
Source: FE Analytics
As the table above shows, passive strategies dominated sales last year.
Across all asset classes, investors were opting for index-tracking strategies over their actively managed counterparts.
As such, the best-selling fund of last year was the Vanguard LifeStrategy 60% Equity, with £2.2bn finding its way into the multi-asset strategy. The fund is one of the asset management house’s popular risk-weighted mixed asset funds, which are built from underlying Vanguard trackers.
Several other members of the LifeStrategy range also featured among the top 20 funds attracting the most inflows last year. The Vanguard LifeStrategy 40% Equity fund took in £1.5bn, while the Vanguard LifeStrategy 80% Equity fund had inflows of £992.2m.
Another Vanguard strategy took significant inflows during 2019, with the Vanguard FTSE U.K. All Share Index acquiring £1.9bn in new money. However, a good chunk of the money arrived in the fund during the second half of the year when £1.3bn invested in the strategy.
The Vanguard UK tracker was one of four in the top 20 funds attracting the most inflows last year.
Sentiment towards the domestic market sagged as the likelihood of a ‘hard Brexit’ increased after former prime minister Theresa May failed to secure backing for her withdrawal agreement.
However, Boris Johnson’s general election victory ensured support for a similar agreement was guaranteed, ending some of the Brexit uncertainty and allowing depressed UK equity valuations to correct somewhat.
But there were some well-known active UK equity portfolios that benefitted from strong inflows over the course of 2019 as well.
Liontrust Special Situations captured £800.8m in inflows, which when combined with healthy performance over the course of the year took its total assets under management to £5.6bn.
Meanwhile, CFP SDL UK Buffettology – which has caught investors’ eyes with very strong returns in recent years – crossed the £1bn mark in 2019, having started the year with assets of around £530m. It closed 2019 at a size of £1.4bn after investors poured £665m into the portfolio.
The first half of the year had been dominated by growing hostilities between the US and China over trade, a lack of clarity over Brexit and uncertainty about whether the Federal Reserve would continue with rate hikes or begin to loosen policy after a painful end to 2018. However, as investment conditions started to improve in the latter half of the year, so too did markets and investor risk appetite.
Source: FE Analytics
While the Vanguard FTSE U.K. All Share Index fund benefited from greater clarity on the Brexit process, a more positive outlook for markets saw more global equity strategies emerge, although here too passives were the main vehicles for exposure.
An interesting inclusion in the top-10 most bought funds of the second half of 2019 was BlackRock ACS World ESG Equity Tracker, which drew inflows of £572.7m.
Interest in environmental, social & governance (ESG) investment strategies has strengthened more recently as climate protests and awareness of environmental issues increased.
The BlackRock global equity strategy aims to track the performance of the MSCI World ESG Focus Low Carbon Screened index, which is designed to maximise exposure to positive ESG factors while minimising carbon exposure and targeting risk and return characteristics similar to those of the MSCI World index.
Another ESG fund found among the top-selling strategies of the second half was the BlackRock ACS World Low Carbon EQ Tracker, which saw inflows of £504.63m.
The fund closely tracks the MSCI World Low Carbon Target index – a large- and mid-cap index designed for investors wishing to manage potential risks associated with the transition to a low carbon economy.