Investors Sell Standard Life Aberdeen Funds in 2017

BlackRock's range of tracker funds meant the firm was by far the most popular fund house by flows. Standard Life's absolute return fund remains well out of favour

David Brenchley 27 December, 2017 | 8:24AM
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BlackRock, Standard Life

The growing popularity of passive funds continues to buoy BlackRock, the most popular fund house with investors of 2017, according to data from Morningstar Direct.

Meanwhile, newly merged fund houses Standard Life Investments and Aberdeen Asset Management continued to shed assets in the year to November 30.

BlackRock, one of the world’s largest providers of passive solutions, saw net inflows of more than £32 billion. Tracker funds in its Authorised Contractual Scheme range were most popular after being launched earlier this year. Its iShares range of index funds also caught the imagination of investors.

Its most popular actively managed fund was the BlackRock Absolute Return Bond Fund, managed by Andreas Dörrenhaus. The fund can take both long and synthetic short positions using derivatives.

Bond Funds Prove Popular

This follows from news that investors are beginning to stash their spare cash in fixed income vehicles. M&G Investments, the second most popular fund house by inflows, was helped by Richard Woolnough’s Morningstar Silver-rated Optimal Income and James Tomlins’ Global Floating Rate High Yield Bond funds.

The top two positions have not changed since we ran the data at the midway point of this year. But Baillie Gifford and Legal & General both surged up the table in the second half to pip Royal London to third and fourth place respectively.

Baillie Gifford was helped by the April launch of its Long Term Global Growth Investment Fund, while L&G was another that benefited from both passive and bond popularity.

Surprisingly, it was two gilt trackers that were the most popular. Its L&G All Stocks Index Linked Gilt Index Trust and the Morningstar Silver-rated L&G All Stocks Gilt Index Trust both saw net inflows of over £1 billion.

Gilts have not performed well this year, with the Investment Association UK Index Linked Gilts and IA UK Gilts sectors producing average returns of just 0.96% and 1.13% respectively year-to-date. This is concerning, says Adrian Lowcock, investment director at Architas, because it means they are lagging well behind the rate of inflation, which recently hit 3.1%.

Ben Yearsley, director at Shore Financial Planning, says investors should avoid gilts moving into 2018. Neither rising interest rates nor the potential for a Jeremy Corbyn-led government would be good for the asset, he notes.

Merger Fails to Excite Fund Investors

While Standard Life Aberdeen’s (SLA) share price is up 11% since the two firms’ March merger, investors in its funds have been less enthused.

Both houses have seen large outflows in recent years. Aberdeen’s focus on emerging markets didn’t help through what has been a tough period for the asset class. Standard Life’s Global Absolute Return Strategies Fund has offered disappointing performance in recent years.

Investors pulled £5.2 billion from Standard Life funds and £1.4 billion from Aberdeen offerings. Despite that, joint chief executives Martin Gilbert and Keith Skeoch last week told investors the outflows were “in line with our expectations”.

Standard Life has only seen net inflows in two of the previous 17 months. It was the Morningstar Bronze-rated Global Absolute Return Strategies (GARS) fund that caused Standard Life trouble, losing almost £5 billion of assets.

September was the first months Aberdeen had seen net inflows in three years. The Aberdeen Japan Equity and Aberdeen Multi-Asset funds saw outflows of £587 million and £451 million respectively.

Colm Kelly, analyst at broker UBS, says poor fund performance provides little confidence of a turnaround in flows in the near term. Should the outflows be for structural, rather than cyclical, reasons, more reinvestment into its fund range will be needed.

Elsewhere, First State saw net outflows of £1.8 billion as the Morningstar Silver-rated Stewart Investors Asia Pacific Leaders Fund lost £1.6 billion of assets after underperforming for the past two years.

Both Scottish Widows and Phoenix Group round out the bottom five, both seeing just over £1.6 billion of outflows.

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

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk