UK Equity Income Best Selling Funds in September

Political and economic uncertainty in the US and Europe meant UK investors favoured domestically focused funds last month

Emma Wall 31 October, 2013 | 3:31PM
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Income remains the holy grail of investing, the latest sales figures from the Investment Management Association (IMA) have revealed. 

Last month UK Equity funds outsold all other regions, seeing inflows of £505 million. In total, private investors poured £2 billion into open-ended funds last month - making the third quarter of 2013 the best-selling three-month period for funds since the second quarter of 2000. 

The most popular IMA sector was UK Equity Income with sales of £358 million, the largest level since April 2007. The second most popular sector was Mixed Investment 20-60% Shares, formerly known as the Cautious Managed sector. 

Fears over the US shutdown and on-going problems in the Eurozone meant UK investors favoured the domestic market, with UK focused funds proving the most popular, followed by Global funds which saw inflows of £365 million and then Europe with inflows of £240 million in September. 

Senior investment manager at Hargreaves Lansdown, Adrian Lowcock, said that the low levels of interest available on cash, gilts and bonds mean investors were turning to dividend paying stocks. 

“Equity income continues to remain popular with investors as the interest earned on cash remains low and returns on gilts and bonds have come under pressure following suggestions in May from the Federal Reserve that they would cut the rate of Quantitative Easing (QE) later this year," he said.

Jason Hollands, Managing Director at Bestinvest said that not all equity income funds would continue to deliver in the future however. 

"Rising share prices have in turn pushed yields down on equity income funds, narrowing the yield premium they have enjoyed for some time over corporate bond funds," he said.

"In our view it is important to invest with managers focused on stocks with the potential to grow their dividends from here, not just those with a current high yield but where the level of dividend cover may be weak or where the business fundamentals could deteriorate."

Investment into ISAs last month totalled £102 million - a significant improvement on the same month last year, which saw investors take £26 million out of their ISAs.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Emma Wall  is former Senior International Editor for Morningstar