Investors Pour £20bn into Funds in 2013

Open-end funds saw inflows of £20.4 billion last year, with equity funds taking the bulk of cash - and fixed income losing cash for the first time ever

Emma Wall 29 January, 2014 | 10:49AM
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Consumers poured more than £20 billion into funds last year, up from £14.3 billion in 2012 - as rising stock markets boosted investor confidence. 

Funds under management in open-end funds reached a record £770 billion by the end of 2013, an increase of 16% on the previous year according to the Investment Management Association.

Equity funds took the bulk of the cash, seeing inflows of £11.4 billion. This was the highest level of funds since 2000 at the height of the dot com bubble. Equity funds were the most popular asset class every calendar month since September 2012 bar one month - March 2013. In contrast, fixed income saw outflows for the first time since the IMA began collating the data in 1992. Fixed income was the best-selling sector in 2012.

These figures suggest that the 'Great Rotation' out of bonds and into stocks is underway in earnest. As yields on cash and bonds fell, investors were forced up the risk scale to higher risk, higher yielding fixed income and equities. But although fixed income experienced net outflows last year, a large amount of cash remains in the bond market.

Global equity funds were the best-selling region, as currency fluctuations in emerging markets put investors off Asian and Latin American stocks. Global equity funds have been the best-selling region for six consecutive years, taking £4 billion in 2013.

UK equity funds surged in popularity, with net retail sales of £2.9 billion helping to boost the region to the second most popular. This is despite considerable outflows of £2 billion from Neil Woodford's UK equity income funds. An improving economic outlook and steady stock market rally can be credited with the UK's return to favour. 

In another turn in fortune, European equity funds - which were the least popular region in 2012 - took £2 billion in sales, the highest level since 2000. 

Many investors chose to gain equity exposure through tracker funds, which took inflows of £3.2 billion in 2013. This is the largest proportion of the market since the IMA began collating the data.

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Emma Wall  is former Senior International Editor for Morningstar

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