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January 23, 2024

Everything Flows, 12/23: Equity Flows Turn Positive for First Time Since May

by Dewi John.

Asset class view

  • Money market fund took £9.48bn, finishing a positive quarter for the asset class.
  • Equity fund flows went positive for the first time since May, at £1.11bn.


Active v passive

  • Active funds suffered redemptions of £2.2bn, excluding money market funds.
  • Active equity and bond flows were negative (-£1.18bn and -£872m, respectively) and passives positive (£2.3bn and £1.15bn).



  • Bond Global USD netted £1.72bn, followed by Alternative Credit Focus (£1.16bn).
  • Bond GBP Corporates (-£900m) and Bond USD Government (-£892m) saw the largest outflows.


Sustainable fund flows

  • While conventional funds took £10.38bn (£876m ex-MMFs), sustainable funds took £350m (£378m).
  • Sustainable bond funds were the most popular (£255m), and £92m went to equities.


Asset manager view

  • Legal & General was the top-selling fund manager, netting £5.17bn, mainly to one money market vehicle.

Flows by Asset Class

Chart 1: Asset Class Flows, 36 Months, to December 2023 (£bn)

Source: LSEG Lipper


December, like November, was a strong month for developed market equity indices, and this was reflected in fund flows, as UK investors got in on the act. Equity fund flows went positive for the first time since May, to the tune of £1.11bn. Over the course of 2023, however, £24.15bn was redeemed from equity vehicles.

That was beaten by money market fund (MMF) redemptions over the year, however, as £39.51bn poured out of the asset class over the year. This trend stands in stark contrast to MMF flows in Europe and the US, where investors have been attracted by higher rates on cash. The reason for this was the near £70bn that went into MMFs in October 2022, in the aftermath of the September mini-budget, and to which the UK market adjusted over the following months. This seems to have bottomed out at the end of Q3, and MMFs have taken £15bn over Q4.

The success story over the year has been bonds, taking £10.17bn, followed by mixed-assets funds. The latter has taken £887m over the course of the year, though that’s been the success story of the first two-thirds of 2023. The last four months have seen outflows of £6.1bn—though, as we’ll see later, this has played out very differently depending on the risk band.

Alternatives funds have also had a negative year (-£3.93bn), as have real estate vehicles (-£2.15bn) and commodity funds

Overall, for December, mutual funds and ETFs netted £10.73bn (£1.26bn ex-MMFs), with these figures being negative £46.69bn and negative £22.54bn, respectively, for the full year.


Chart 2: Asset Class Flows, Active and Passive, December 2023 (£bn)

Source: LSEG Lipper


Despite it being a risk-on month, the biggest winner has been money market funds, which netted £9.48bn.

A familiar pattern to end the year, equity and bond active fund flows were negative (-£1.18bn and -£872m, respectively) and passives positive (£2.3bn and £1.15bn). As highlighted above, unusually positive flows into alternatives (£767m), with all this and more going into a single share class of a high yield-focused alternative credit fund. Otherwise, there was little movement in this asset class, but with net outflows.

Mixed-assets funds shed £810m, negative for the fourth consecutive month.

In total, active funds took £7.29bn (-£2.2bn ex-MMFs), while passives netted £3.44bn.


Chart 3: Passive Asset Class Flows, Mutual Funds v ETFs, December 2023 (£bn)

Source: LSEG Lipper


It’s clear from chart 3 that it’s all been mutual funds in the passive space in December, when they took a total of £3.49bn, as compared to £41m outflows for ETFs. Bond passive mutuals took £1.24bn, with outflows of £85m to bond ETFs. Equity passive mutuals attracted £2.23bn, while their ETF peers took £64m, or 2.8% of the total.


Flows by Classification

Chart 4: Largest Positive Flows by LSEG Lipper Global Classification, December 2023 (£bn)

Source: LSEG Lipper


Given the top-level asset class profile, it’s no surprise that Money Market GBP was December’s top-selling classification, attracting £9.4bn.

Source: LSEG Lipper


Slightly more surprising, given the positive month for equities, the second-biggest seller was Bond Global USD, which netted £1.72bn, followed by Alternative Credit Focus (£1.16bn). As outlined above, this is largely down to inflows to one high yield-focused share class. However, ABS-focused strategies seem also to have been popular this month. Over the past year, when recessionary fears were peaking, these funds saw large outflows given their exposure to the US consumer. So, perhaps the inflows indicate renewed optimism about the US economy.


Source: LSEG Lipper


Regional equity funds are prevalent in chart 4: Equity US (£1.01bn), Equity Japan (£862m), Equity Europe ex-UK (£492m), and Equity Global ex-UK (£230m). Equity Global—normally up-front-and-centre in equity-positive months—is just outside the top 10, attracting £195m, indicating that investors are being rather more discerning in their equity allocations than for quite some time.

Lastly, Mixed Asset GBP Aggressive’s £453m inflows shows that this classification continues to be attractive, despite the unpopularity of mixed-assets funds more broadly.


Chart 5: Largest Outflows by LSEG Lipper Global Classification, December 2023 (£bn)

Source: LSEG Lipper


Bond GBP Corporates (-£900m) and Bond USD Government (-£892m) saw the largest outflows over December. It’s also been another poor month for Mixed Asset GBP Balanced (-£847m), Flexible (-£260m), and Conservative (-£150m), continuing the pattern of positive for Aggressive and negative for all other mixed-assets classifications.

Despite the positive period for UK equities, redemptions continue, with the three UK classifications shedding £1.19bn between them over December.


Sustainable Fund Flows

Chart 6: Sustainable Asset Class Flows, December 2023 (£bn)

Source: LSEG Lipper


As was the case in October, the virtual absence of blue in chart 6 indicates the sluggish uptake of sustainable funds over the course of December. While conventional funds took £10.38bn (£876m ex-MMFs), sustainable funds barely made a dent, netting £350m (£378m). Of that, bond funds were the most popular (£255m), with £92m going to equities. Despite the negative flows to real estate, sustainable property attracted £62m.


Source: LSEG Lipper


Equity Global remains the focus for ESG investors—as the table below indicates—so the low take for global funds this month may (in part) be a function of this, but there is more than this muting flows.


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, December 2023 (£bn)

Source: LSEG Lipper


Legal & General netted £5.17bn, up from £3.2bn in November. Some £4.75bn went to money market funds and, as last month, flows are dominated by one single share class. Equity funds saw £466m in inflows for the month.


Source: LSEG Lipper


BlackRock came second, attracting £2.61bn. This was accounted for by £2.09bn inflows to equity funds, and £1.86bn into money market vehicles.


Source: LSEG Lipper


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