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Chart 1: Asset Class Flows, Active and Passive, February 2022 (£bn)
Source: Refinitiv Lipper
Equities, both domestic and global, fell over the course of the month, as inflation continued to trend upwards (a record CPI of 5.5% in January).
February continues January’s trend, in that flows of all other asset classes are muted when compared to large redemptions from money market funds. While bond and equity were in the black the previous month, however, except for £51m into commodity funds (spread across five vehicles, all Commodity Blended), there’s a negative sign before all asset classes. We’ve been running this report since November 2020, and this is the first time we’ve seen this.
The largest redemptions were from money market funds (-£7.7bn), followed by bond (-£1.7bn) and equity
(-£824m). Negative flows for real estate have been a constant theme, although providing more background mood music. This month, they have ticked up to £225m.
While the bulk of bond redemptions, at £1.5bn, were from active funds, all but £116m of equity redemptions came out of passives.
Chart 2: Passive Asset Class Flows, Mutual Funds v ETFs, February 2022 (£bn)
Source: Refinitiv Lipper
As you can see from the chart above, most passive equity outflows (-£671) were from mutual funds, with relatively little movement from ETFs. Conversely, bond ETFs shed £97m over the month, while their mutual fund peers saw outflows of £61m.
Passive alternatives were in positive territory, albeit slightly (£92m), with most of this money going to a vehicle investing in gilt futures, used mainly as a hedge against changes in real interest rates. Given the situation over the recent period, perhaps the only surprise is that we’ve not seen more of this.
Chart 3: Largest Positive Flows by Refinitiv Lipper Global Classification, February 2022 (£bn)
Source: Refinitiv Lipper
There’s no distinct theme in top-selling classifications this month—other than to note that, despite it being a decidedly risk-on month, at a granular level the leading classifications tend to be of a riskier variety. It’s also interesting (though hardly surprising, given the spike in energy prices) to see Equity Theme—Natural Resources appear in the top 10, where Alternative Energy was a theme through much of last year (although the latter still saw inflows of £57m).
Equity Global is again the most popular classification—albeit, at £1.4bn, less than half the flows of the previous month. Less than a tenth of this—£133m—went to passives, although the UBS FTSE RAFI Developed 1000 Index makes it into the top five by flows for the month. The big winner here was the ACS Climate Transition World Equity fund, taking £1.2bn.
Source: Refinitiv Lipper
Second placed is Mixed Asset GBP Aggressive, taking in £412m, broadly in line with the previous month. Aggressive was the best selling mixed-asset risk classification last year and has gone into the new year in the same fashion, despite growing risk aversion. The top seller in February, Vanguard LifeStrategy 80% Equity, is an internal fund of funds investing in passive vehicles.
Source: Refinitiv Lipper
Lastly, on leading classification, we take a brief look at third-placed Equity Emerging Markets Global, with inflows of £372m. Passives edged it, taking £194m of that, and three of the top five funds in the classification are passive vehicles.
Source: Refinitiv Lipper
Chart 4: Largest Negative Flows by Refinitiv Lipper Global Classification, February 2022 (£bn)
Source: Refinitiv Lipper
Given the picture at the broad asset class level, it’s no shock that the largest outflows are from Money Market GBP funds, at £7.7bn. You have to squint at the above bar chart to get a sense of the relative flows for the rest.
UK equities have had a relatively decent run over the past year, especially given the preceding period, and expectations have improved, so it’s perhaps surprising that they remain an unloved asset class. Combined outflows for Equity UK, Equity UK Small & Mid Cap, and Equity UK Income come to £1.9bn, which would be significant even in a month where risk-asset flows were not so muted. Some £1.4bn of this is active money. It’s not possible to say with any certainty as to why this continues, but while in the past performance was certainly an issue (UK equities have underperformed for years up until late 2020), the ongoing trend seems to be driven by the requirement to remedy the perceived bias to domestic markets.
Chart 5: ESG Asset Class Flows, February 2022 (£bn)
Source: Refinitiv Lipper
Alternative, bond, equity, and mixed-assets ESG funds all saw inflows for February, as had been the case the previous month. What’s slightly different is that all their conventional equivalents suffered redemptions. The only ESG asset class that was in the red this month was money market funds.
Equities saw the largest movements, with £2.6bn versus -£3.5bn (ESG/non-ESG). The table below looks fairly similar to the Equity Global one on p5, with the addition of a Royal London emerging market tracker, and the UBS (Irl) ETF plc MSCI UK IMI SR UCITS ETF GBP Ad—a UK equity ETF with a name that just trips off the tongue.
Source: Refinitiv Lipper
Mixed asset ESG flows took in £800m, while their non-ESG peers saw outflows of £60m. Domestic asset managers normally take the lion’s share of flows in this region of the market, so it’s unusual to see the top three vehicles being European.
Source: Refinitiv Lipper
Chart 6: Largest Positive Flows by Promoter, February 2022 (£bn)
Source: Refinitiv Lipper
When at last one major asset class is in positive territory, it’s normal to see the familiar fund management behemoths dominate takings. As we’re in the unusual situation of everything going into reverse, we’re also seeing a significant change in rankings for the month.
Top of the table is Legal & General, taking in £752m. The biggest money takers at an asset-class level were money market (£643m) and equity (£381m).
Source: Refinitiv Lipper
Second placed was Fidelity International, netting £721m. It’s largest money takers by asset class were equity (£374m) and money market (£298m).