December 16, 2020

Everything Flows: Looking Beneath the Surface

by Dewi John.

Muted flows conceal large reallocations from active to passive in equity and bond funds

Asset Class View

  • Money Market funds took November’s largest share of flows (£4.9bn) in a partial reversal of October’s ‘risk on’ environment. This was followed by Mixed Assets, with £3.7bn. Both equities and bonds were in positive territory, netting £1.5bn and £1.3bn, respectively.

Active v Passive

  • Looking beyond the headline figures, passive equity funds took in £31.5bn, and bonds £10.5bn, leaving their active peers deep in negative territory.
  • While mutual funds dominate passive flows, ETFs continue to edge into the space, with equity ETFs claiming 7% of the passive market from 2% the previous month, and bond ETFs at 28%, up from 25%.


  • Money Market GBP was the most popular Lipper Global Classification, taking in £4.9bn, followed by Mixed Asset GBP Balanced (£2.9bn). Equity US, at third, took in £2bn.
  • It was a poor month for domestic equities, with Equity UK losing £3.1bn, and Equity UK Income down £796m.

ESG Flows

  • Equity funds dominate ESG flows for November, taking in £1bn, with mixed assets netting £676m. Despite a plethora of launches, ESG bond funds took in a mere £76m.

Asset Manager View

  • Vanguard Group, Legal & General, HSBC, and Goldman Sachs took almost £7bn during the month over a broad range of assets classes. Global bond assets proved popular for the first two promoters.

Flows by Asset Class

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

Source: Refinitiv Lipper

Money Market funds saw the largest net inflows in November, with £4.89bn, followed by Mixed Assets with £3.7bn. Meanwhile, bonds reversed the previous month’s outflows, attracting £1.25bn.

Judging by the net numbers, November was a quiet month. Net flows into equities were £1.52bn—less than a tenth of October’s £16bn take. But the top-line figure hides large flows from active to passive, making the equity and bond bars look like a reflection on a pond: active equity funds lost £30bn, as passives gained £31.5bn. The figures for active and passive bond funds were minus £9.26bn and £10.51bn, respectively. This reverses active equity’s positive October and enhances the previous month’s strong trend to passive vehicles.

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

Source: Refinitiv Lipper

Mutual funds dominate passive flows across all asset classes, except for Commodities. ETF versus mutual fund flows were: equity, £2,18bn to £29.35bn; and bond, £2.31bn to £8.2bn. That said, ETFs continue to nibble away at their older siblings’ market share, as in November ETFs took in 7% and 28% of passive flows to equity and bond funds, respectively. In October, those figures were 2% and 25%.

Flows by Classification

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

Source: Refinitiv Lipper

November’s flows by Lipper Global Classification have been more broadly distributed than October, where UK and US equities swept all before them. This month, Money Market GBP has seen the most inflows, taking £4.92bn. The three largest money-takers are listed below:

Source: Refinitiv Lipper

Next in line comes Mixed Asset GBP Balanced, which was in last month’s top 10, attracting £2.86bn. Virgin Money has the top two slots, although this seems to be down to the provider shifting assets between funds. Then Vanguard and JPMorgan, with Moderate and Cautious multi-asset funds taking the remainder of the top-five table.


Source: Refinitiv Lipper

Equity US remains in the running, although squeezed out of October’s number one slot. As with last month, passive assets take the lion’s share. What is interesting is that active funds dominate in fourth-placed Equity Global, with passive funds shedding £479.5m and active netting £1.67bn. Some £453m of this went to Robeco BP Global Premium Equities and £438m into various share classes of Fundsmith Equity.

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

Source: Refinitiv Lipper

Delving into the depths of negative territory, UK Equity has reversed its strong performance of the previous month, from £6.57bn to minus £3.12bn in November. Equity UK Income continues its long run of unpopularity, with minus £796m. It’s also apparent that, despite wide-ranging predictions of a strong post-COVID rebound for emerging markets, UK investors don’t seem to be convinced, and Equity Emerging Markets Global have shed £106m this month.

Something else worthy of note is the £135m outflows from Bond USD High Yield, running counter to the trend analysed by my colleague Tom Roseen in the US. This reflects overall negative flows for high-yield funds, indicating that if UK investors remain yield hungry, they are choosing to dine elsewhere.

ESG Flows

Chart 5: ESG Asset Class Flows, November 2020 (£m)

Source: Refinitiv Lipper

Equities dominate ESG flows for the month (£1bn), followed by Mixed Assets (£676m). Despite the pick-up in ESG bond fund launches, it is perhaps surprising that fixed income lags in fourth place, with just £61m of net flows.

Source: Refinitiv Lipper

The top money-taker is BlackRock’s actively managed ACS Climate Transition World Equity X1 Acc GBP, closely followed by the Northern Trust EM Custom ESG Eq Idx, which is the only passive fund in the top five. Clearly, ESG is one area that active management is holding back the rising passive tide—though, given the proliferation of ESG indices, one wonders for how long?

Turning our attention to ESG Mixed Assets, Royal London rules the roost, taking all but one of the places in the top-five table, below—although two are different share classes in the same fund—the Royal London Sustainable Diversified Trust, which rather seems like hogging the limelight. That said, the promoter features heavily throughout the ESG Mixed Asset table, so this is clearly an area it intends to make its own.

Source: Refinitiv Lipper

Flows by Promoter

Chart 6: Largest Positive Flows by Promoter (£bn)

Source: Refinitiv Lipper

Vanguard Group, Legal & General, HSBC, and Goldman Sachs pull well ahead of the opposition this month, each netting more than £1bn—£2.56bn in the case of Vanguard. While in the previous month, individual passive equity funds dominated asset gathering, Vanguard’s top money-takers are spread across bond, equity, and mixed assets, with Vanguard Global Bond Index GBP Hdg Acc attracting most (£352bn).

As noted above, Legal & General’s predominant asset gatherer was the LGIM Sterling Liquidity 1 money market fund. In second place, and, like Vanguard’s top seller, a global bond fund, is its LGIM Global Corporate Bond B GBP Inc, netting £573m.

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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