Asset class view
- Money market funds (MMFs) saw the largest inflows for the month (£2.25bn) and second largest for the year (£8.56bn).
- Lower rate expectations spur flows of £2.16bn into bond funds, following two months of redemptions.
Active v passive
- Ex MMFs, active funds attracted £2.1bn, while passives netted £1.53bn.
- A muted month for equity flows masks the familiar trend from active (-£278m) to passive (£671m).
Classifications
- Money Market GBP was the top classification by flows in August, attracting £2.27bn.
- Equity US was the most popular long-term asset classification (£1.88bn, split £1.14bn passive to £741m active).
Sustainable fund flows
- Sustainable funds ex-MMF took £1.28bn, while their conventional peers attracted £1.82bn.
- Sustainable equity funds netted £1.26bn, as their conventional peers saw outflows of £392m.
Asset manager view
- Aviva was August’s top money taker, netting £2.26bn, followed by Abrdn with £1.55bn.
Flows by Asset Class
Three-year flows
Chart 1: Asset Class Flows, 36 Months, to August 2024 (£bn)
Source: LSEG Lipper
The FTSE 100 has gone sideways throughout the summer in contrast to global and US markets struggling upwards. All, however, were hit by turbulence in early August.
Nevertheless, it’s been a good month for almost all asset classes. To paraphrase the Dodo in Alice in Wonderland, “Everybody has won, and all must have prizes… except for real estate”. Year-to-date, in aggregate there have been flows of £20.41bn into mutual funds and ETFs, or £11.85bn excluding money market funds (MMFs).
YTD, real estate has seen the strongest outflows, at £1.54bn, followed by alternatives, at £1.07bn.
On the plus-side of the equation, bonds have seen the largest YTD inflows, at £10.14bn, followed by MMFs, at £8.56bn. Also in positive territory are equities (£1.97bn), mixed assets (£1.96bn), and commodities (£389m).
Active versus Passive
Chart 2: Asset Class Flows, Active and Passive, August 2024 (£bn)
Source: LSEG Lipper
In line with flows for the month, global asset returns were largely in positive territory, according to analysis from FTSE Russell. Nevertheless, equity volatility for the month was at a four-year high as markets fell heavily—not least the US and Japan—likely catalysed by weak US economic data and yen strengthening, although both markets rebounded further into the month.
With the dollar weakening on Fed rate cut expectations and divergence in the pace of monetary easing, currency moves became a significant driver of returns, particularly versus the US dollar, as FX moves versus the currency were larger than most equity and bond returns in local currency.
MMFs led the field, netting £2.25bn. Lower rate expectations could well have been the spur for the £2.16bn into bond funds following two months of redemptions. Active funds were the main losers then but have proven to be the principal beneficiaries in August, taking £1.76bn of the total.
Mixed assets (£605m) saw the next largest flows, with all but £34m of this going to active funds, followed by an unusually strong showing for commodities, at £537m—all and more going into passives. We’ll look at exactly where this has gone under Chart 3.
Meanwhile, a muted month for equity flows masks the familiar trend from active (-£278m) to passive (£671m). Alternatives saw money go the other way, with £216m into active funds as £95m was redeemed from passives.
Real estate reversed July’s modest gains, as investors redeemed £163m from the asset class.
ETFs and Passive Mutual Funds
Chart 3: Passive Asset Class Flows, Mutual Funds v ETFs, August 2024 (£bn)
Source: LSEG Lipper
While August was like July in that passive bonds and equity were in the black, August looks rather different. In July, passive mutual funds were the main beneficiaries, but both these and ETFs were in the black. August saw outflows of £176m from equity ETFs, while their mutual fund peers took £847m, while bond ETFs netted £267m while their mutual fund equivalents saw inflows of £116m.
Commodities were the real surprise for the month, with two variants of the L&G Multi-Strategy Enhanced Commodities ETF netting £548m. The ETF seems to have run on just seed capital between its 2023 launch and now. Alternatives mutual funds also shed £95m over the month.
Flows by Classification
Largest inflows
Chart 4: Largest Positive Flows by LSEG Lipper Global Classification, August 2024 (£bn)
Source: LSEG Lipper
European and UK large caps outperformed FTSE All-World over August, according to FTSE Russell analysis, with, respectively, the US, Asia Pacific, emerging markets, Japan, and FTSE 250 lagging as the latter gave up some of the previous month’s substantial gains. That said, Equity UK Small & Mid Cap funds were still in the black to the tune of £86m for the month, as were Equity Emerging Markets Global (£238m).
However, the two biggest money-taking classifications were the same as the previous month: Money Market GBP (£2.27bn) and Equity US (£1.88bn, split £1.14bn passive to £741m active).
Source: LSEG Lipper
We’ve noted previously that inflows in this category were unusual for the asset class, as they were favouring active managers, so this represents something of a comeback for US passives, especially as the top three share classes are passive (see table below).
Source: LSEG Lipper
The £1.76bn flows to Bond Global GBP funds was driven mainly by a £1.63bn allocation to the AI Sterling Corporate Bond Insured Pension Acc fund, which seems to be the largest inflow for any share class over the month. Meanwhile, Bond Global Corporates LC and USD took £472m and £344m, respectively.
What is rather unusual is the paltry £15m allocation to Equity Global, a classification that normally sees extreme inflows or outflows depending on market sentiment, but hardly ever close to zero as we see this month. However, there was a £552m allocation to Equity Global ex UK funds, which were almost entirely passive.
It’s also worth noting that Equity India netted £176m despite concerns over rich valuations, while Equity Japan took £137m even though the rally seems to have petered out at the end of H1 and the high volatility for the month.
Largest Outflows
Chart 5: Largest Outflows by LSEG Lipper Global Classification, August 2024 (£bn)
Source: LSEG Lipper
As was the case with the two top classifications, the two bottom remain the same from July to August: Equity UK (-£1.11bn: -£634m active to -£481m passive), Equity UK Income (-£328m). Equity Asia Pacific ex Japan followed, with outflows of £328m, split broadly evenly between active and passive.
While the market is anticipating lower rates, this doesn’t seem to be helping Equity Theme – Infrastructure—a classification whose bond-like qualities caused it to be badly beaten up by rising rates. August saw outflows of £248m.
Non-aggressive mixed asset outflows see no respite, as GBP Balanced saw £312m head out of the door. Interestingly, GBP Conservative had a somewhat better month, netting £16m. Since rates spiked in 2022, both classifications have suffered, so it will be interesting to see if this bifurcation between Conservative and Balanced continues.
Sustainable Fund Flows
Chart 6: Sustainable Asset Class Flows, August 2024 (£bn)
Source: LSEG Lipper
Despite all the kerfuffle around ESG, the conventional-to-sustainable equity rotation continues, in the UK market at least. Sustainable equities took £1.62bn as their conventional equivalents suffered outflows of £870m. What’s interesting about the table below, however, is how diversified it is geographically, compared to, say, a year ago where it would have been dominated by Equity Global. And, while it’s unusual to see no Equity US in the table, the following six share classes are all of that classification, together totalling £569m.
Source: LSEG Lipper
Sustainable bond funds took £232m, in line with July’s £288m. However, while sustainable fixed income bucked the previous month’s trend of outflows, this month they were only about 10% of total flows for the asset class.
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, August 2024 (£bn)
Source: LSEG Lipper
Aviva was August’s top money taker, netting £2.26bn, followed by Abrdn (£1.57bn) and Vanguard (£1.42bn). Aviva’s flows were dominated by bonds, at £1.79bn, followed by MMFs, at £739m.
Source: LSEG Lipper
Abrdn’s main money takers were MMFs (£1.39bn), followed by equity (£189m) and bond (£142m).
Source: LSEG Lipper
