Asset class view
- June saw the largest inflows into money market funds (MMFs, £3.76bn) since December 2023.
- Funds excluding MMFs saw outflows of £2.81bn.
Active v passive
- Index-tracking funds overall took £805m, with inflows of £987m to mutual funds and £181m outflows from ETFs.
- Inflows of £1.33bn to passive bonds split £1.57bn to mutual funds, with ETF outflows of £236m.
Classifications
- Equity Global funds attracted £1.97bn, with £1.16bn going to passive strategies.
- Equity UK saw the largest outflows, with redemptions of £5.22bn—£3.35bn from passive strategies.
Sustainable fund flows
- Sustainable funds ex-MMF took £865m, while their conventional peers shed £3.48bn.
- Sustainable equity funds were the main beneficiaries (£762m), as their conventional peers shed £1.84bn.
Asset manager view
- Insight was June’s top money-taker, netting £2.64bn, followed by HSBC with £1.3bn.
Flows by Asset Class
Three-year flows
Chart 1: Asset Class Flows, 36 Months, to June 2024 (£bn)
Source: LSEG Lipper
Despite moderating, if still sticky, inflation and positive, if weak, GDP growth through most of the developed world, we’ve seen a dash to cash in June. The MSCI ACWI and S&P 500 headed up over June, while the FTSE 100 trended down.
Over H1 2024, UK funds took £5.27bn (£5.53bn ex MMFs). Bond funds were the main beneficiaries, netting £7.8bn over H1. The only other asset class to be in the black was equity, with flows of £451m. On the negative side of the equation, real estate funds shed £1.42bn, followed by outflows from alternatives funds (-£755m), mixed assets (-£401m), MMFs (-£264m), and commodity funds (-£140m).
Active versus Passive
Chart 2: Asset Class Flows, Active and Passive, June 2024 (£bn)
Source: LSEG Lipper
June saw the largest inflows into MMFs (£3.76bn) since December 2023.
Funds overall saw inflows of £950m in June, although excluding MMFs this falls to outflows of £2.81bn. It was another good month for index-tracking funds, as long-term active funds shed £3.58bn (compared to outflows of £2bn in May), while their passive equivalents attracted £771m (down from £3.37bn in May).
In our last report, we observed that the global bond selloff late in the month hadn’t fed through into bond fund flows, as these netted £2.28bn. As expected, that’s no longer the case, with bonds overall shedding £2.11bn, with outflows of £3.45bn from active strategies and inflows of £1.33bn into passives.
Equity funds saw redemptions of £1.07bn, split pretty evenly between active and passive strategies.
Meanwhile, alternatives reversed the previous month’s outflows, taking £469m—all and more into active strategies; mixed assets saw net inflows of £217m (unusually with most going into passive funds), and commodity and real estate funds shed £196m and £113m, respectively.
ETFs and Passive Mutual Funds
Chart 3: Passive Asset Class Flows, Mutual Funds v ETFs, June 2024 (£bn)
Source: LSEG Lipper
Index-tracking funds overall took £805m for the month, with inflows of £987m to mutual funds and £181m outflows from ETFs.
The total inflows of £1.33bn to passive bonds split £1.57bn to mutual funds, with ETF outflows of £236m. On the other hand, passive equity mutual funds shed £540m while their ETFs peers took £31m. Meanwhile, as covered above, there was an unusual net flow to passive mixed assets of £150m, while passive commodities shed £192m, almost all from mutual funds.
Flows by Classification
Largest inflows
Chart 4: Largest Positive Flows by LSEG Lipper Global Classification, June 2024 (£bn)
Source: LSEG Lipper
Money Market GBP was the most popular classification in June (£3.81bn), reversing last month’s outflows. A lot of the volatility in this asset class can be attributed to the fact that corporates use MMFs to stow cash before dividend payments and other corporate actions. That said, it could also be a reaction to the fact that bonds, despite their popularity from 2023 to date, are not delivering. For example, while Bond GBP Government took £606m over the month and £8.02bn over 12 months, the average return for these funds over both Q2 and YTD is still negative, while MFFs are in the black. The same can be said of Bond Global USD funds, which took £433m in June. That said, the same argument could be made last month, with most govvies still down over the month and year to date, and where Money Market GBP funds saw the second largest outflows. It seems unlikely, then, that performance of other ostensibly “risk-free” assets explains the volatility in MMF flows.
Source: LSEG Lipper
Equity Global funds attracted £1.97bn over the month, with £1.16bn of this going to passive strategies—indeed, £950m to one share class of the Mercer Passive Global Equity fund (see table below).
Source: LSEG Lipper
Despite the US equity rally narrowing in Q2, investors committed more capital to Equity US (£1.88bn). Sector beneficiaries, according to FTSE Russell analysis included software services, chipmakers, chip equipment manufacturers, riding on the coat tails of the AI-driven rally.
As has been the case since this started, investors for the most part seem to prefer to get their exposure to this through US (and even Global) exposure, rather than to AI-themed plays, or even Equity Sector Information Tech funds, which took £153m over the month. And, as we observed last month, Equity US bucks the active-to-passive trend, with all but £8.9m of net flows going to active strategies—although the top three-selling Equity US funds were trackers.
Despite the strong YTD performance of Equity India, which was also a top performer in 2022 off the back of a number of significant IPOs, flows are relatively muted, with £165m over the month, and £929m over 12 months.
Largest Outflows
Chart 5: Largest Outflows by LSEG Lipper Global Classification, June 2024 (£bn)
Source: LSEG Lipper
Equity UK was again in the doghouse, with redemptions of £5.22bn—£3.35bn from passive strategies. Equity UK Income also suffered outflows of £416m. Bond GBP Corporates and Bond Global GBP funds saw the second and third largest redemptions, at £1.33bn and £772m, respectively, with Bond Emerging Markets Global LC funds also suffering (-£637m, a similar level to May).
Mixed Asset GBP Balanced funds continue to suffer (-£514m), along with their Conservative peers (-£99m). We’ve previously speculated that this is the likely result of the unwinding of a low-rate environment trade, where investors used these funds as bond proxies with equity kickers, and this seems still to hold—though if anyone’s got an alternative view, we’d love to hear from you.
Lastly, the £240m redemptions from Absolute Return GBP Medium is largely the result of outflows from a number of funds from one fund company.
Sustainable Fund Flows
Chart 6: Sustainable Asset Class Flows, June 2024 (£bn)
Source: LSEG Lipper
Sustainable funds ex-MMF took £865m, while their conventional peers shed £3.48bn. As in May, sustainable equity funds were the main beneficiaries, attracting £762m, as their conventional peers saw outflows of £1.84bn. The largest beneficiary of this, was an Equity US, which took £1.53bn.
Source: LSEG Lipper
While sustainable bond flows were modest (£47m), conventional flows were negative to the tune of £2.16bn. While other sustainable flows were smaller still, the only sustainable asset class in negative territory were MMFs (-£2m).
Source: LSEG Lipper
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, June 2024 (£bn)
Source: LSEG Lipper
Insight was June’s top money-taker, netting £2.64bn, followed by Insight (£1.3bn) and Vanguard (£1.19bn). Insight’s flows were dominated by MMFs, at £2.47bn.
Source: LSEG Lipper
Meanwhile, HSBC’s flows were much more broad-based, and comprised of equity (£702m), MMFs (£232m), bond (£209m), and mixed assets (£158m).
Source: LSEG Lipper
