November 17, 2020

Everything Flows: A Stand-Out Month for Passives and Equities

by Dewi John.

Refinitiv Lipper’s new review of UK monthly fund flows coincides with a strong risk-on October, as equities dominate.The bulk of this has been invested in developed markets—largely the UK and US—in line with market recovery trends from April. Most of this has been deployed using passive vehicles.

While risk assets wobbled in June—with equities seeing more outflows than they did in March—it looks like investors are currently confident that the market has further to run.

Asset Class View

  • UK investors’ risk appetite increased in October, with net inflows into equities (£16bn) and out of bonds and money market funds (-£4.43bn and -£2.06bn, respectively).

Active v Passive

  • Passive vehicles were supported strongly, accounting for almost all of equity flows and nearly £2bn of positive bond flows despite the asset classes’ overall losses.
  • Within passive allocations, index-tracking equity mutual funds attracted far more than their ETF equivalents (£14.52bn v £239m). While bond passive mutual funds still took about three-times more than ETFs, the latter are netting progressively more of the passive market, as the number of available products and markets increases.


  • Equity US has seen the largest inflows (£7.24bn), followed by Equity UK (£6.57bn). With both, the bulk of assets flowed into a single index-tracking mutual fund.
  • Bond GBP Corporates funds saw the greatest outflows (-£3.37bn), followed by Money Market (-£2.09bn) and Bond GBP Government (-£1.77bn).

Asset Manager View

  • BlackRock and Vanguard took more than the rest of the 10 top asset gatherers combined, with £53.88bn between them, the majority of which went to equity products.


Flows by Asset Class

 Chart 1: Asset Class Flows, Active and Passive, October 2020 (£bn)

Source: Refinitiv Lipper

Chart 1 shows that October has been something of a risk-on month, with assets flowing out of bond (net -£4.43bn) and money market funds (net -£2bn), principally into equities, which gathered £16bn over the period.

These flows have all favoured passive funds. The overall loss for bonds, for example, masks a £1.98bn inflow for passive bond funds, with a consequently much larger outflow of £6.41bn for their active counterparts. Likewise, all but £1.23bn of equity inflows have been into the coffers of passive vehicles.

Chart 2: Passive Asset Class Flows, Mutual Funds v ETFs, October 2020 (£bn)

Source: Refinitiv Lipper

The overwhelming majority of equity flows have been through mutual funds rather than ETFs (£14.52bn v £239m).

While mutual funds also dominate passive bond flows (£1.48bn v £499m for ETFs), ETFs are taking greater market share. Between March and October, UK bond ETF assets went from £145bn to £180bn—and increase of 24%. That £35bn more than accounts for the increase in total passive bond assets over the period of £30bn.

For now, at least, it looks like investors have more than given bond ETFs the benefit of the doubt, as they came through March’s crucible intact.


Flows by Classification

Chart 3: Largest Positive Flows by Refinitiv Lipper Global Classification (£bn)

Source: Refinitiv Lipper

Seemingly unfazed by all the uncertainties around the US election, Equity US has seen the largest inflows, taking £7.24bn over the month, followed by Equity UK with £6.57bn.

Source: Refinitiv Lipper

Most remarkably, one tracker share class amounts for all of Equity US’s positive flows, and more: BlackRock ACS US Equity Tracker X1, netting £7.73bn in one month. As you can see from table 1, nothing else comes near—with actively managed Baillie Gifford American coming in second, attracting a more modest £106m.

Source: Refinitiv Lipper

It’s a similar story with Equity UK, where one FTSE All Share tracker share class has taken most of the assets flowing into the sector (£5.79bn, above). There are two active funds in the top five: one single-strategy, Ninety One GSF UK Alpha; and one multi-manager, SW Multi-Manager UK Equity Focus A Acc.

After that, levels drop off sharply, with Equity Global trailing at a distant third (£950m). Despite it looking like a risk-on month, most flows have been directed towards developed markets. Nevertheless, Equity Emerging Markets Global has attracted £652m; Bond Emerging Markets Global HC, £539m; and Equity Asia Pacific ex Japan with £425m—amounting to £1.62bn in total, or a quarter of that which US equities have garnered.

Chart 4: Largest Negative Flows by Refinitiv Lipper Global Classification (£bn)

Source: Refinitiv Lipper

At the other end of the table, Bond GBP Corporates (-£3.37bn) have seen the greatest outflows, followed by Money Market Funds (-£2.09bn) and Bond GBP Government (-£1.77bn). This reflects the risk-on environment. Again, we see a sharp drop off with Bond Global High Yield GBP shedding £609m and Equity UK Income continuing its run of unpopularity, with outflows of £574m.

UK High Yield has also seen outflows (-£190m), indicating that HY in general has been passed over in the rally of risk assets, with investors sceptical about its prospects.


Flows by Promoter

Chart 5: Largest Positive Flows by Promoter (£bn)

Source: Refinitiv Lipper

Given the prevalence of passives in October, it should be little surprise that passive leviathans BlackRock and Vanguard take the top two slots. Indeed, they took more than the next eight combined, netting £53.88bn between them, with BlackRock taking £34.38bn of that. Some £23.34bn of this was in equity funds—as we saw, £7.7bn of that into one US equity tracker alone—followed by bonds (£3.68bn) and money market funds (£6.94bn).

Vanguard saw the lion’s share of its flows—£9.07bn out of £19.05bn—come from equities this month, with bonds and mixed assets also weighing in with takings of more than £5.1bn.

Refinitiv Lipper delivers data on more than 330,000 collective investments in 113 countries. Find out more.

The views expressed are the views of the author and not necessarily those of Refinitiv. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.

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