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Investors flock to funds in record numbers but shun UK

Funds attract record-breaking inflows in first half of the year but UK equities remain out of favour.

Investors flock to funds in record numbers but shun UK

Investors ploughed a record-breaking £18.4 billion into funds in the first half of the year but the focus on overseas investment reveals they are still cautious about the Brexit effect.

Figures from the Investment Association (IA) reveal that following the inflows in the first six months of the year, funds under management now stand at £1.1 trillion. Net inflows in June reached £2.9 billion, a reversal of the trend a year ago, when a net £3 billion was pulled out of funds.

The record-breaking figures shows investors have ‘returned from their 2016 hiatus’, said IA fund market specialist Alastair Wainwright.

All asset classes reported an uptick in flows in the first half of the year, with mixed asset funds attracting the highest at £5.7 billion, followed by bond funds at £4.2 billion, while equity funds rebounded from last year's outflows to attract £4.1 billion of net investment.

The most popular funds were those in the Targeted Absolute Return sector, which attracted £2.2 billion in the first half of the year. The Sterling Strategic Bond sector brought in £1.8 billion and Global Equity sales were £1.6 billion.

UK equity sectors were the least popular, with investors withdrawing £1.1 billion from the three UK equity sectors in June. The worst-selling sector in June was the UK All Companies sector, which racked up outflows of £486 million.

Global funds were the best-selling in June, attracting £465 million of inflows, followed by Targeted Absolute Return funds at £447 million and Strategic Bond funds at £363 million.

Adrian Lowcock, investment director at Architas, said while the headline figures suggested 'animal spirits' had returned to markets, the underlying trends presented 'a more mixed picture'.

He pointed to the lack of appetite for UK equity funds, and the enthusiasm for targeted absolute return investments, as evidence of investor caution.

‘Investors are clearly cautious on the outlook for the UK and concerned about the impact rising inflation is having on the UK economy and the effects Brexit will have on the country’s economy,’ he said.

Lowcock argued high valuations were also leading investors to protect themselves against a potential market fall.

'Investors remain sceptical and are holding defensive assets including absolute return funds to protect themselves in the event of a correction or sell-off,' he said.

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19 comments so far. Why not have your say?

an elder one

Aug 07, 2017 at 18:04

Time to sell foreign funds? I'll stay with UK equities and look to buy more.

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Chris Clark

Aug 12, 2017 at 09:11

"Investors flock to funds in record numbers but shun UK"

Quite right. I have taken 85% of my not very big SIPP outside of the UK. I shall not invest in Brexit Britain.

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Donald Chan

Aug 12, 2017 at 09:29

Chris, do you think your pronouncement helps or hinders the UK?

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Philip Drew

Aug 12, 2017 at 10:37

There is a lot of easy to digest information about UK/US companies available to me so I tend to directly invest in UK companies but use Investment Trusts to invest on non-english speaking countries.

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Capt Ahab

Aug 12, 2017 at 10:40

Time to sit on one's hands and wait for things to cool down and not to wade into the Stockmarket. Losing face is a major facet of Chinese/Korean culture, and probably Donald Trump as well. One wonders at the next step with things being ramped up to fever pitch. A mistake could easily lead to serious conflict

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Chris Clark

Aug 12, 2017 at 12:03

@Donald, actually, you make an interesting point. I'm a strong Remainer as folks might have guessed. I have been receiving a fair number of emails by brexit-facing organisations saying how to make money out of brexit, and one organisation known to be supported by wealthy brexiteers offered me a 2 year brexit opportunities advice service for around £2,600. This revolved mainly about identifying UK quality tech companies for foreign takeover, with the high paying jobs, whilst share prices were depressed. Imagination Tech Group was one of them, and we all know about Unilever.

I declined the offer but am following the strategies. They work.

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Donald Chan

Aug 12, 2017 at 13:23

@Chris, of course I realised you are a Remainer. Without wishing to over simplify the argument, it is becoming clear that the two sides of the Brexit argument are determined upon whether one believes in the future of this country as an independent trading nation (or not). Your comment " I shall not invest in Brexit Britain." indicates which camp you fall into. If you were a serious investor, you would already have an international portfolio arranged according to your view of the world. As a trading nation, you would be aware, UK companies have far reaching links already with the rest of the world and their income is dependent upon these overseas activities. You will have spread your risk according to your personal inclinations. The idea that there are certain pre-Brexit strategies " that work". is a nonsense.

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Chris Clark

Aug 12, 2017 at 19:05

@Donald. I started out with my view of the world. That is the brexiteer strategies work for them, and are working for me. If you regard this evidence as nonsense then this is a useless conversation. You may wish to ask yourself why exactly extremely wealthy brexit leaders like Aaron Banks campaigned so hard to quit. You can see why I'm raising this.

Oh btw, as of yesterday:

FTSE100 YTD = 2.3%

All-World Index = 11.8%

Source: FT

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Donald Chan

Aug 12, 2017 at 22:24

@Chris, what is the timing? When did you adopt these "strategies"? If they are strategies for the future, at what point in time do you decide they are working? I am not sure what approach you are taking regards investment. You indicate that you are following examples set by wealthy "Brexiteers" such as Aaron Banks. I admit, I don't have a clue what you are doing investment-wise.

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Chris Clark

Aug 12, 2017 at 22:36

@Donald - straight after Remainers lost the vote last June. Firstly identify weakened British companies which are possible takeover targets by foreigners. Second consider British commodities companies likely to see increased profits through £/$ devaluation. Third, invest in European and International companies not affected by Brexit or a British slow down, and in recovering economies.

All Brexit strategies I was advised by Brexiteers to use. My pension is up 19% since 1st January.

Does anyone else yet see why wealthy Brexiteers campaigned to leave Europe?

I remain a committed Remainer.

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Donald Chan

Aug 13, 2017 at 09:20

@Chris, OK, some elements of investment approach emerging. We all make an assessment of the potential. This contrasts somewhat with your bald statement " I shall not invest in Brexit Britain". However, what does "committed Remainer" mean in this context? Are you working for a reversion of Brexit? And, if so, how does that impact your investment strategy?

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Chris Clark

Aug 13, 2017 at 10:11

@Donald. I want an exit deal where I can not tell the difference between what we have now as EU member, and what we then have. A second referendum where Leave lose would achieve this for me. I would anticipate a return of R & D development and will invest in growth businesses with good R & D budgets.

(Except I do want the EU Commissioners to be voted in, not appointed.)

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Donald Chan

Aug 13, 2017 at 10:41

@Chris (No chance)

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Chris Clark

Aug 13, 2017 at 11:02

@Donald, let's check in in March 2020. And do a portfolio update at the same time. :-)

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Donald Chan

Aug 13, 2017 at 12:20

@Chris, whatever. The difficulty I am having is understanding whether you are keen to share your investment insights or whether you are disseminating a political view on Brexit. The future of the UK economy is unknown but I would hope that it is good.

My investment "strategies" are unknown to anyone else but regardless, I have hope and some confidence in the UK working its way through the upheaval. (Of course, we may have a nuclear war before then, but good luck)

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Chris Clark

Aug 13, 2017 at 17:42

@Donald, I hadn't really thought about it, but if asked, I would probably say here is one's way of demonstrating the financial consequences of Brexit at a micro level.

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Donald Chan

Aug 13, 2017 at 19:28

@Chris, not sure why we are the only two continuing this thread. I think we've bored off everyone else. We had better leave it with our diffrerences unreconciled.

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Chris Clark

Aug 13, 2017 at 19:31

@Donald - Agree. Everyone - welcome back!

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Aug 13, 2017 at 19:56

I'm very much in the shun UK camp. Not only are the prospects overseas far brighter, the pound is likely to continue sliding.

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