January 20, 2021

Everything Flows: Brexit Fears Spark Dash to Cash

by Dewi John.

Spooked by concerns over a no-deal Brexit, investors banked profits, as Money Market funds saw the largest flows in December


Asset Class View

  • With the threat of a no-deal Brexit looming, investors put more than £8bn into Money Market funds in December. Mixed-Assets funds were the second-most popular allocation, although lagging considerably with £2.21bn. Equities’ take was down over the month—no surprise in this environment.

Active v Passive

  • While Money Market and Mixed-Assets funds are overwhelmingly the terrain of active managers, the rotation from active into passive in equities and bonds continues—albeit at a more muted level, with both asset classes seeing positive passive and negative active flows.
  • ETFs dug their heels in, as their share of passive market flows rose to an average 50%, despite equity and bond passive flows being down on November.


  • Money Market GBP was the most popular Lipper Global Classification, taking in £8.1bn—almost double the previous month. Equity Global, with distinct active and ESG allocations, followed with £2.97bn. Small- and mid-cap UK equities bucked the trend against UK assets, attracting £1bn into passive vehicles
  • December was the month of the Anglophobe trade, as Equity UK shed £3.95bn, followed by Bond GBP Short Term, Equity UK Income, and Real Estate UK.

ESG Flows

  • Equity flows dominated the month’s ESG sales. But the real story is that ESG dominated equity flows overall (£2.66bn), with non-ESG equities otherwise in negative territory.

Asset Manager View

  • BlackRock led the month’s flows (£3.51bn), netting £1.9bn in Money Market assets alone. The firm also gained £1.43bn in equities. Aviva, too, was a major beneficiary of December’s dash to cash, taking £3.57bn in Money Market funds.


Flows by Asset Class

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

Source: Refinitiv Lipper


December saw investors take shelter from the prospect of a no-deal Brexit. Positive Money Market flows were the largest—£8.1bn—since May, when we were languishing under Lockdown 1.0.

Mixed Assets were the second most popular money-takers, attracting £2.21bn, with a small net outflow of £4m for passives, so a strong positive for active money over the month. That assets were broadly distributed among the allocations to Mixed Assets is indicated by the fact that no single mixed-asset sector appears in the top-selling Lipper Global Classifications, detailed below. Bonds and equities netted £1.42bn and £1.39bn, respectively, with equities down and bonds up on the previous month, albeit neither massively so.

The trade-off between active and passive management in equities and bonds continues the trend in favour of passives, with index-following equity funds attracting £3.36bn, while actives were negative £1.97bn; passive bonds were up £2.11bn and their active peers were down £688m. The devil is in the detail with equities this month, however, as both ESG and global equities seriously bucked the passive trend. But let’s not get ahead of ourselves.


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

Source: Refinitiv Lipper


Passive flows for equities and bonds were down heavily on November, as equities went from £31.53bn to £3.36; and bonds from £10.51bn to £2.11bn. However, ETF sales in absolute terms have held steady, with ETF equity flows going from £2.18bn in November to £1.79bn in December, and bonds from £2.31bn to £986m—or a 53% and 47% take of the passive market in their respective asset classes.

The question is, when passive flows increase, to what degree will ETFs be able to keep pace with their hitherto dominant passive mutual fund peers?


Flows by Classification

Chart 3: Largest Positive Flows by Refinitiv Lipper Global Classification, December 2020 (£bn)

Source: Refinitiv Lipper


Money Market GBP came in as the top Lipper Global Classification for the second consecutive month, growing from £4.92bn to £8.1bn month on month. All this and more was taken by Aviva Investors Sterling Liquidity 9—up a whopping £11.3bn over the month.

Source: Refinitiv Lipper


Equity Global came in second (£2.97bn), and here active managers took the majority of the pot (£1.88bn). There are some interesting trends in evidence here. First, a lot of this money is in ESG—something we look at more closely in the ESG section below. The main money-taker is BlackRock’s ACS Climate Transition World Equity fund, with other top-five funds Baillie Gifford and FP WHEB also being sustainable funds.

Fifth-placed Robeco BP Global Premium Equities has a pronounced value tilt, perhaps demonstrating some investors, at least, are keen to benefit from the rotation into the style over Q4.

Four out of the top five are actively managed, with the second-placed L&G Global Developed Four Factor Index fund being a smart beta vehicle, offering exposure to Mid Cap, Value, High Momentum, Low Volatility, High Profitability, and Low Investment factors.

Source: Refinitiv Lipper


Investors did, however, keep some UK equity risk on the table, with a £1bn allocation to small- and mid-cap funds, through allocations to FTSE 250 passives (£1.1bn passive versus negative -£101m active).


Chart 4: Largest Negative Flows by Refinitiv Lipper Global Classification, December 2020 (£bn)

Source: Refinitiv Lipper


Brexit cast a pall over most UK assets, with investors bailing out of equity, short-term sterling bonds, and UK property—together making up the worst four sectors for flows—totalling negative £5.46bn. Again, the figures make miserable reading for active managers: of the £6.94bn flowing out of the bottom 10 sectors, £6.21bn of it was actively managed money.

Equity UK saw the greatest outflows for the second consecutive month. This is despite the strong fourth-quarter performance of UK equity funds, driven by the post-October vaccine rally and the accompanying rotation from growth stocks into value. Concerns over the consequences of a no-deal Brexit likely dominated investor sentiment, and it will be interesting to see if this trend is reversed in January’s figures. As the year came to an end, though, they had largely decided to cash out and wait and see.


ESG Flows

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

Source: Refinitiv Lipper


Not only do equities dominate December’s ESG flows, ESG dominates equity flows (it’s always nice to have a bit of symmetry in these things). ESG equity flows were a chunky £2.66bn. Deducting this from total equity flows shows that non-ESG equities are negative by more than £1.2bn for the month.

This is all the more remarkable, given that the top equity ESG money-takers tend to be actively managed, thus swimming against the passive stream.

Source: Refinitiv Lipper


As in November, December’s top money-taker is BlackRock’s actively managed ACS Climate Transition World Equity X1 Acc GBP. It scooped up about three times the assets of its nearest rivals, pulling away from the pack—quite remarkable for a fund launched in August. Next in line is the Baillie Gifford Positive Change B Acc. Its top holding, at more than 9% of the portfolio, is Tesla—considered a rather problematic stock in ESG terms by many. The Northern Trust EM Custom ESG Eq Idx is the only passive fund in the top five, just as in December.

Mixed assets are the next most popular ESG asset class, taking in £626m, or 31% of the Mixed Assets total. Liontrust and Royal London dominate. That’s not only true of the top-five table below—of the top 20 Mixed Assets money-taker this month, 13 are from these two houses.

Source: Refinitiv Lipper


Flows by Promoter

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

Source: Refinitiv Lipper


That it’s been a relatively high-volume month is testified by the fact that Vanguard has increased its take for December, but dropped from first to third place, month on month, as BlackRock and Aviva moved ahead.

More than half of BlackRock’s £3.51bn take was in Money Market funds (£1.9bn). All of this and more went into one fund share class, with BlackRock ICS Sterling Liq Admin IV Acc taking £2.76bn. The firm also gained £1.43bn in equities, with £396m going into the iShares Core FTSE 100 UCITS ETF.

Aviva, too, was a major beneficiary of December’s dash to cash, taking in £3.57bn, with a lot of switching around between different fund share classes taking place in its Money Market fund stable. Its Sterling Liquidity 9 is almost certainly the largest money-taker over the month, across all asset classes. Vanguard’s biggest money-taking assets were equity (£1.16bn) and bond (£964m). With the former, the Vanguard FTSE 250 UCITS ETF GBP Dist took in £474m, and global bonds was the strongest-selling sector.


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