Equity Income: Record £500m Invested

Investors have poured a record amount of cash into equity income funds, with sales totalling £500 million last month. The inflows were fuelled by last minute ISA investors

Emma Wall 28 May, 2014 | 12:57PM
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Last minute ISA investors plumped to put their cash in home-grown equities, helping boost April’s fund sales of the UK equity income sector to a record £500 million. Total equity sales totalled £1.4 billion, making it the most popular asset class for 13 months in a row.

Property funds also proved popular, according to the latest figures from the Investment Management Association, thanks to rising residential property prices, the low cost of borrowing and the promise of diversified income. Property funds recorded inflows of £446 million, the most that has been invested in the sector since December 2009.

A sizable proportion of ISA investors used fund platforms to make their last minute purchases, and Cofunds, Fidelity, Hargreaves Lansdown, Skandia and Transact recorded ISA sales of £908 million in April.

The domestic equities and income themes were evident among the top selling funds at Hargreaves Lansdown, with Artemis Income topping the table, followed by Lindsell Train UK Equity and Miton UK Smaller Companies.

Among the most searched for funds on Morningstar.co.uk last month were Invesco Perpetual High Income and Schroder UK Dynamic Smaller Companies.

Next month sees the retail launch of former Invesco manager Neil Woodford’s new UK equity income fund offering. The group Woodford Funds is reported to have already taken £4 billion thanks to a mandate from wealth manager St James Place and a deal with platform Hargreaves to manage part of their multi-asset offering.

Tom Becket of Psigma Investment Management yesterday warned that investors’ preoccupation with UK and US equities could become a risky play.

“It is our view that after one of the most powerful equity bull markets in the history of man, investors need to be aware that the ripe, low-hanging fruit have all been picked. Making returns from equity markets going forward will be much more difficult,” he said.

“Moreover, we believe that following the herd in to relatively expensive US and UK equities is not the key to making healthy returns in the years ahead. Instead the value markets in North Asia – including Japan, Peripheral Europe and certain Emerging Markets such as Brazil are where investors should be strategically asset allocating.”

Fixed income funds saw sales of £270 million in April, and although this is significantly less than other asset classes, it was the best inflow for bonds since May last year.

 

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Emma Wall  is former Senior International Editor for Morningstar