Focus on Funds: GoldenBuy – Bond funds en vogue

With markets remaining volatile the latest sales figures show that UK savers continued to support collectives, with £1.8 billion invested in retail funds in August.

Investment Association sales data shows the total amount invested in retail funds contrasted strongly with the more than £500 million that was withdrawn in August 2019; bond funds in particular benefitted from the inflows.
 

Backing bonds

Bond funds have become increasingly popular as income investors starved of dividends search for reliable returns; £1.4 billion in net retail sales over the month was into bond funds

Companies across the marketplace have axed dividends in the face of Covid-19 pressures, forcing equity income investors to look elsewhere for sources of yield.

Equity funds returned to positive territory with net retail sales of £340 million; however UK equity funds remain out of favour with outflows of £748 million as investors continue to shy away from their home market due to uncertainty over Brexit, Covid-19 and the paucity of dividends.

Investors that have been trapped in gated property funds took advantage of the slight thawing of the situation and hastily withdrew £3 million.

Trackers held steady, taking in a net £1.3 billion, while active funds saw an inflow of more than £500 million.

Responsible investment funds took in £897 million during August, although their overall share of industry funds under management remains low at just 2.7%.

Investor demand for sustainable investing has been on the rise in 2020, with fund managers scrambling to roll out new ESG (environmental, social, and governance) products.
 

Most popular sectors

The bestselling sector was Global, attracting £705 million of net retail sales, followed by Global Bonds with £581 million; Mixed Investment 40-85% Shares, Strategic Bond and Europe ex-UK completed the top five bestselling sectors.

The worst-selling sector was Short Term Money Market, which saw a £557 million outflow; Money Market funds as a whole saw net outflows of £743 million over the month.

After Global, the second-most popular region for investment was Europe excluding UK; Asia and Japan took third and fourth place, respectively, followed by North America funds.

In announcing the figures, Chris Cummings, chief executive of the Investment Association, said: ‘The last month of summer saw a cementing of saver confidence with £1.8 billion put into funds throughout August, in a further bolstering of the Covid-19 fund market recovery.

‘Marrying financial returns with environmental, social and governance considerations continued to be popular with investors in August. Responsible investment funds attracted almost £900 million, proving their resilience amid ongoing economic uncertainty.’