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Top earner Woolnough sees outflows of £1.5 billion in February

M&G's top-earning fund manager Richard Woolnough saw £1.5 billion leave his M&G Optimal Income fund in February as investors continued to be cautious of stock markets

Top earner Woolnough sees outflows of £1.5 billion in February

Star bond manager Richard Woolnough, the highest paid employee at M&G, has seen £1.5 billion from his £18 billion M&G Optimal Income fund, the UK’s largest retail fund.

The strategic bond fund saw the heaviest retail and institutional outflows of any individual UK fund in February, according to Morningstar data collected by Numis Securities. One-month outflows matched the total outflows from Woolnough’s fund in 2018.

A report in the Financial Times recently revealed high-flier Woolnough earned £16.6 million last year, taking home more than chief executive Mike Wells.

This was despite his fund being one of the worst performers in the Strategic Bond sectors over the last year, down 1.1% and ranked 48 out of 59, according to Citywire data.

By contrast, star equities manager Terry Smith saw inflows of £194 million into his nearly £18 billion Fundsmith Equity fund, taking it closer to becoming the largest fund in the global sector. It has returned 11.5% over the past year, sitting 18th out 756 global funds, according to Citywire data.

Two funds in the UK All Companies sector were also among the biggest losers, with the £2 billion AXA Framlington UK Select Opportunities losing £114 million, as veteran Nigel Thomas handed over the reins to Christopher St John, retiring following a 40-year investment career.  

Mark Barnett’s £7 billion Invesco High Income fund saw £112 million in outflows, following a poor run of performance, down 2.1% over the past year, ranked 76 out of 112 UK equity income funds.

Investors cashed out of a number of targeted absolute return funds - SLI GARS (-£640m), Newton Real Return (- £397m), Newton Global Dynamic Bond (-£312m), Aviva Multi-Strategy Target Return (-£279m) and Aviva Investors Multi-Strategy Target Income (-£260m). 

Investors continued to give Europe and UK equity funds the cold shoulder, with the two sectors seeing the most outflows in February, according to figures from fund manager trade body the Investment Association (IA). 

Investors pulled out £453 million from Europe-focused funds in February, up from £450 million withdrawn in the previous month, while UK sector net sales were down £236 million, compared with the £135 million cashed out in January. 

An exodus from investments in these two regions comes as Brexit uncertainty loomed in the UK and economic slowdown fears hit Europe.

Instead, investors sought refuge in global funds, which emerged as the best-selling region in February, with inflows of £513 million.   

Meanwhile, mixed asset was named investors’ favourite asset class, receiving inflows of £385 million. This was followed by fixed income, which saw net sales of £77 million, as investors spread their bets and piled into bonds now that US interest rates are on hold and there are signs of weakness in the global economy.  

On the whole, UK funds experienced net outflows of £156 million, making this the fifth consecutive month of withdrawals, totalling £7 billion in aggregate. This was an improvement on January net sales, which slid by £593 million, but still marked a steep fall from the £1 billion inflows into funds for the same month last year.  

‘Savers turned towards mixed asset and global equity funds to weather the ongoing economic and political uncertainty, giving European and UK equity funds, which saw continued outflows, the cold shoulder,’ said IA chief executive Chris Cummings.

Jason Hollands, managing director at wealth manager Tilney, said the figures painted a picture of weak sentiment in what is normally the peak season for investing in ISAs and pensions.

‘This shows that, despite the sharp rally in markets year to date after the US Federal Reserve calmed markets with a change in policy after a torrid end to 2018, UK private investor sentiment continues to be weak. This is almost certainly in large part down to the current domestic political uncertainties which have elevated further in recent weeks, since this data,’ he said.

Though Europe fund outflows outstripping UK funds indicates caution with ‘Germany teetering on recession and France engulfed in its own political crisis’, he added.

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