Asset class view
- September also saw the largest outflows in risk assets for two years (-£16.54bn).
- September’s equity outflows (£9.5bn) were the largest since September 2022 (£14.5bn). The next largest were from bonds (£5.52bn).
Active v passive
- Active funds saw redemptions of £5.77bn, while their passive peers suffered outflows of £9.59bn.
- The largest passive outflows were from equities: £7.38bn, with all but £45m coming out of mutual funds.
Classifications
- Mixed Asset GBP Flexible saw the strongest flows for the month, netting £1.72bn.
- Despite a strong year, Equity US suffered the second-worst outflows of £3.69bn, all and more from passives.
Sustainable fund flows
- Total sustainable fund flows for September were £805m, as conventional funds shed £16.1bn.
- Sustainable equity funds attracted £2.23bn, as their conventional peers lost £9.5bn.
Asset manager view
- Legal & General was September’s top money taker, netting £1.87bn, dominated by money market funds (MMFs).
Flows by Asset Class
Three-year flows
Chart 1: Asset Class Flows, 36 Months, to September 2024 (£bn)
Source: LSEG Lipper
Disinflation continued over the third quarter, partly driven by weaker oil prices. Monetary easing gathered pace as central banks shifted focus from inflation to growth. Over the past 12 months, money market funds have sucked in cash from investors attracted by higher short-term rates. And, even with these dropping, that trend may well continue, unless a positively sloping yield curve convinces them otherwise. Alongside this, a below-50 US PMI and compressed equity risk premium indicate correction risk for equities, especially in the US, according to FTSE Russell. Stock-bond correlation remains elevated post-Covid, posing challenges for asset allocators.
So much for the quarter’s macro drivers. What’s news this month is the largest outflows in risk assets for two years (-£16.54bn). That’s changed the character of YTD flows—in August there had been flows of £20.41bn into mutual funds and ETFs, or £11.85bn excluding MMFs. In September, those figures are £8.8bn and -£837m, respectively.
YTD, equities have seen the strongest outflows, largely due to September movements (£3.34bn), followed by real estate (£1.65bn), then alternatives (-£1.47bn).
On the scanter plus-side of the equation, MMFs have seen the largest YTD inflows (£9.64bn), followed by bonds (£4.33bn, down from £10.14bn in August), mixed assets (£991m), and commodities (£334m).
Active versus Passive
Chart 2: Asset Class Flows, Active and Passive, September 2024 (£bn)
Source: LSEG Lipper
Despite considerable market volatility, most equity markets rose over Q3. Bonds, too, were largely in positive territory.
September’s equity outflows (£9.5bn, split £2.12bn active, £7.38bn passive) were the largest since September 2022 (£14.5bn). The next largest were from bonds—the largest since October 2022—at £5.52bn (£3.27bn active, £2.25bn passive). Mixed assets suffered redemptions of £944m, with a small inflow of £48m into passive vehicles. Alternatives saw redemptions of £406m, again with a small passive inflow of £21m, while real estate redemptions were £111m—all active. Commodities experienced the lowest outflows, at £55m, all passive.
The one item on the other side of the equation was the £1.18bn to MMFs, almost exclusively to actively managed funds.
ETFs and Passive Mutual Funds
Chart 3: Passive Asset Class Flows, Mutual Funds v ETFs, September 2024 (£bn)
Source: LSEG Lipper
The largest passive outflows were from equities: £7.38bn, with all but £45m coming out of mutual funds. While that seems a tad surprising, we saw a similar trend exactly two years ago, when passive equity mutual funds had outflows of £4.88bn, while ETFs shed £470m, although the most obvious difference between then and now on the passive front is that passive bonds (initially) experienced inflows. Passive bonds saw redemptions of £2.25bn, with ETFs shedding £707m. Other passive flows, as can be seen from the chart, were minimal.
Flows by Classification
Largest inflows
Chart 4: Largest Positive Flows by LSEG Lipper Global Classification, September 2024 (£bn)
Source: LSEG Lipper
Given the state of flows this month, it’s surprising to see MMFs not taking the top spot, with Money Market GBP coming in third with £1.29bn. Instead, Mixed Asset GBP Flexible tops the table, netting £1.72bn. However, more than £2bn is accounted for by allocations to two SPW Tactical funds. This seems to be a reallocation from a now-liquidated other SPW Mixed Asset GBP Conservative fund.
Source: LSEG Lipper
Equity Global rebounded from a flat August, attracting £1.56bn (£1.08bn active, £472bn passive).
Source: LSEG Lipper
Bond GBP Government was the most popular fixed income classification, attracting £506m, up from August’s £118m.
Mixed Asset GBP Balanced had a rare month in the black, netting £506m. However, more than double this (£1.28bn) was accounted for by inflows to a single share class—BlackRock Pension Growth X1 Acc GBP.
Largest Outflows
Chart 5: Largest Outflows by LSEG Lipper Global Classification, September 2024 (£bn)
Source: LSEG Lipper
While inflows seem broadly in line with recent trends, outflows are much heavier. Equity UK, as is so often the case, suffered the largest outflows: £3.88bn, £2.92bn of which was from passive vehicles.
Despite a very strong year so far, Equity US suffered the second-worst outflows of £3.69bn. All this and more (£3.9bn) is from passive funds. Speculating wildly, this may be because if you have to liquidate equity assets quickly (excluding the regular whipping boy of the UK), you do it from the most liquid fund strategy from the most liquid market, where valuations suggest that some profit taking might be wise.
Bond Global GBP continued the previous month’s negative flows, with redemptions of £1.76bn, as did Bond Global Corporates LC (-£967m) and Bond Global Corporates USD (-£643m).
Mixed Asset GBP Conservative also saw outflows—not unusual in itself, though the quantum is—£2.35bn. That, however, is accounted for by a reallocation to flexible (see chart 4). What is unusual is seeing investors pull cash out of its Aggressive sibling (-£620m).
There were a few classifications where positive markets did not translate into positive flows. For example, a good quarter for small caps in performance terms, supported by declining rates, didn’t play out for Equity UK Small & Mid cap, which saw outflows of £289m. Other beneficiaries of this rates move included Real Estate equities, which turned positive and led industry returns (Equity Sector Real Est Global saw outflows of £377m), followed by Utilities and Staples (both zero flows), while infrastructure returns were strong, according to FTSE Russell analysis. At the sector level, Energy (-£10m) and Technology and Telecoms (Equity Sector Information Tech, -£134m) lagged the most over the quarter.
Sustainable Fund Flows
Chart 6: Sustainable Asset Class Flows, September 2024 (£bn)
Source: LSEG Lipper
Total sustainable fund flows for September were £805m, as conventional funds shed £16.1bn. Although sustainable bond funds saw outflows of £1.19bn, sustainable equity funds attracted £2.23bn, as their conventional peers shed £9.5bn. As can be seen from the table below, the main beneficiaries were Equity Global and US funds.
Source: LSEG Lipper
Sustainable real estate funds saw the second largest flows, albeit a long way behind at £38m. However, only two share classes attracted cash (see below).
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, September 2024 (£bn)
Source: LSEG Lipper
Legal & General was September’s top money taker, netting £1.87bn, followed by State Street Global Advisors (£1.32bn) and DWS (£1.23bn). Legal & General’s flows were dominated by MMFs, at £2.12bn.
Source: LSEG Lipper
Likewise, SSgA main money takers were MMFs (£1.33bn).
Source: LSEG Lipper
