Investors Continue to Favour Income

THE INCOME INVESTOR: Despite a slow start of the year, investors are continuing to favour funds exposed to developed market equities that pay a dividend

Emma Wall 27 August, 2014 | 4:35PM
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Investors continue to favour UK equity income funds in July, with sales boosted by the launch of Woodford Equity Income the previous month. UK Equity Income was the best-selling fund sector for the four out of the past five months, with inflows of £1 billion in July.

Property continues to prove popular among retail investors, taking in £304 million last month, boosting total assets under management to £21 billion. Property has featured in the top five Investment Management Association best-selling sectors every month this year.

The sector that recorded the most outflows last month was UK All Companies, which lost £230 million under management.

Global emerging market funds saw inflows of just £53 million – despite the sector doing increasingly well in the second quarter of this year. Emerging markets have outperformed developed markets for the last five months but despite this upturn, private investors are favouring developed market equities, and more specifically, UK stocks.

Stephen Cohen, at iShares EMEA believes investors are coming around to the idea that emerging markets offer opportunities.

“While still underweight emerging market equities in many portfolios, investors are turning significantly more positive,” he said.

“This has been driven by a broad improvement in sentiment and fundamentals, led by China, positive speculative impact from elections such as India, Indonesia and Brazil, a shift from the tightening stance across emerging market central banks earlier this year, and markets pricing out - for now – developed market policy normalisation.”

NISA Sales

The latest IMA statistics did reveal a surge in New ISA sales, compared to ISA sales in the same month last year. Investors poured £518 million into their NISA wrappers last month, compared to just £119 million in July last year. The best selling sectors for NISA investors replicated those for all investing – with UK Equity Income proving the most popular.

Passive vs Active Fund Flows

Tracker funds saw inflows of £532 million, the highest inflows since the IMA began recording monthly fund flow data in January 1992. Passive funds now make up 10.2% of the total funds under management, compared to 9.4% this time last year.

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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About Author

Emma Wall  is former Senior International Editor for Morningstar