… while their balanced and cautious siblings remain in the red
Asset class view
- Long-term funds saw outflows of £302m, with equity funds losing £727m
- Money market funds experienced the largest outflows of £7.91bn
Active v passive
- Passive funds in total saw inflows of £3.19bn
- Passive equities (£1.73bn) and bonds (£1.44bn) enjoyed significant inflows over the month
Classifications
- Mixed Asset GBP Aggressive was the best-selling classification, taking £2.13bn, followed by Equity Global
- Equity Global and Equity US also enjoyed combined inflows of more than £2.5bn
Sustainable fund flows
- Sustainable funds took a combined £1.39bn over the month
- Equities dominated the field, netting a total £1.56bn
Asset manager view
- M&G was the top-selling fund manager for the second consecutive month, netting £2.36bn
Flows by Asset Class
Chart 1: Asset Class Flows, 36 Months, to August 2023 (£bn)
Source: LSEG Lipper
Global equity markets fell into the second half of August, giving up many of the subsequent gains, and the FTSE 100 wasn’t immune from this, troughing by the twenty-first of the month—with 10-year gilt yields reaching a 15-year high at about the same time—and hitting an upward trend since then. While the Bank of England’s Monetary Policy Committee paused its rate hike cycle, data showed UK inflation to be annoyingly persistent. As summer drew to an end, investors grappled with the linked uncertainties of the threat of recession, implied by strongly inverted yield curves, and that persistent inflation.
Year to date, there have been outflows of £52.13bn from UK mutual funds and ETFs. However, £53.37bn has left money market funds alone, meaning long-term assets have attracted £1.25bn YTD. Most of this has been to bond funds, which have taken £11.2bn over eight months, and £8.52bn into mixed-assets funds, counterbalanced by the £13.68bn of redemptions from equity funds—despite, as we’ve noted, their outperformance of bonds. Alternatives (-£3.1bn) and real estate (-£1.22bn) have also seen outflows over the year so far.
Chart 2: Asset Class Flows, Active and Passive, August 2023 (£bn)
Source: LSEG Lipper
Mixed-assets funds have been the success story of the month, seeing inflows of £875m. Other than that, the only asset class to be in the black was bonds (£201m). Unlike mixed-assets, which is an almost entirely active story, bond funds continued their active/passive bifurcation, with the former £1.24bn in the red and the latter £1.44bn in the black.
Despite equities being in redemption mode to the tune of £727m, it was a similar story here, as active funds shed £2.46bn and passives netting £1.73bn. Other asset classes to share the active misery were alternatives (-£463m) and real estate (-£113m). And, of course, there are the £7.91bn of outflows from money market funds, overshadowing everything else, with a sliver (£102m) going into passive money market funds.
Overall, passive funds attracted £3.19bn over the month, while active funds suffered redemptions of £3.39bn—or £1.14bn excluding money market vehicles.
Chart 3: Passive Asset Class Flows, Mutual Funds v ETFs, August 2023 (£bn)
Source: LSEG Lipper
Mutual funds took 91% of the passive equity total for the month, or £1.58bn, to ETFs’ £150m. Meanwhile, their bond peers had similar success, taking 67% of the fixed income pot, or £963m, to ETFs’ £477m.
Flows by Classification
Chart 4: Largest Positive Flows by LSEG Lipper Global Classification, August 2023 (£bn)
Source: LSEG Lipper
Mixed Asset GBP Aggressive moved two places up the ranking from July to see the largest inflows for the month, attracting £2.13bn. As indicated by the table below, this was very much driven by flows to BlackRock, which attracted £1.81bn of total mixed asset flows.
Source: LSEG Lipper
And, as is so often the case, the aggregate story masks a rather different story when looked at in a more granular fashion: yes, it’s been a bad month for equities, but only “risk on” dependent on which sector you look at, with both Equity Global (£1.39bn) and Equity US (£1.2bn) faring well. The former’s net assets were split £490m/£897m, active to passive; and the latter £348m/£855m. Interesting that despite the outflows from active funds overall, they’ve still taken a significant slice of assets in these two classifications, plus pretty much all the take for Equity Global Income (£262m). Active fund and sector veteran M&G Global Themes tops the table, and at the other end of the age range, new launch, the actively managed WCM Global Equity Fund, took £114m.
Source: LSEG Lipper
In the fixed income space, investors warmed to sterling govvies, which attracted £782m, with the classification seen to offer attractive yields for the risk. What’s also interesting is £190m flows into Bond GBP Short Term—a classification that has in general seen outflows over recent months.
Chart 5: Largest Outflows by LSEG Lipper Global Classification, August 2023 (£bn)
Source: LSEG Lipper
Of course, outflows were dominated by Money Market GBP. What’s also not surprising is that to see equity global and US inflows more than balanced by the (now seemingly perennial) unloved equity classifications, not least those of the UK, as Equity UK shed £698m, Equity UK Income (£533m), Equity UK Small & Mid Cap (£258m), and Equity UK Diversified (£189m).
What’s also of note is that—as previously seen—neither Mixed Asset GBP Balanced (-£1.13bn) and Mixed Asset GBP Conservative (-£172m) have enjoyed the popularity of their Aggressive sibling.
Sustainable Fund Flows
Chart 6: Sustainable Asset Class Flows, August 2023 (£bn)
Source: LSEG Lipper
Responsible investment funds took £1.39bn for the month. However, this is predominantly an equity story, with the asset class taking £1.56bn. As can be seen from the table, BlackRock dominates, with all the top table coming from this stable.
Source: LSEG Lipper
Bond flows on the positive side are rather more anaemic but, as can be seen from the table below, more evenly spread.
Source: LSEG Lipper
We’ve previously pondered the waning fortunes of ESG mixed-assets funds, reaching the provisional conclusion that this is a likely function of the provider-specific nature of the offering, dominated by two companies. The question is, when do they return to favour, or when does someone else manage to claim the space?
The Sustainable Fund Flows section has a narrower and stricter focus than those which indicate some form of ESG strategy in their fund documentation—to a smaller group of sustainable funds, defined as all SFDR article 9 funds plus all Lipper Responsible Investment Attribute funds reduced to those containing indicative sustainable keywords in the fund name.
Flows by Promoter
Chart 7: Largest Positive Flows by Promoter, August 2023 (£bn)
Source: LSEG Lipper
As was the case in July, M&G was the most successful in asset gathering: £2.36bn, with equities, £1.6bn; bonds, £560m, and mixed-assets £211m.
Source: LSEG Lipper
HSBC came second, attracting £1.83bn. This was mainly accounted for by £887m inflows to equity funds, and £796m to money market vehicles.
Source: LSEG Lipper
