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Nick Train Suffers Outflows

Investors put their faith in index trackers, as the cult of the star manager is called into question and Train suffers biggest ever monthly outflows 

Annalisa Esposito 24 October, 2019 | 2:41PM

Flows

As the cult of the star fund manager is called into question, veteran investor Nick Train has suffered the greatest ever monthly outflows from his Lindsell Train UK equity fund.

Investors pulled £374 million out of the Gold-Rated fund in September, according to Morningstar Direct data, leaving the top-performing fund with £6.9 billion in assets under management. 

Train is known for his buy-and-hold approach to investing, picking quality stocks and household names and keeping them for the long-term. The last time the manager added a new name to this portfolio, whose top holdings include Unilever, Diageo and London Stock Exchange, was July 2017.

As investors continue to await clarity over Brexit, the UK remained out of favour as a region, with many UK-focused funds suffering as a result. Majedie UK Equity fund suffered outflows of £269 million in the month.

But Bhavik Parekh, associate analyst at Morningstar, points out that it is not just the largest and previously most popular funds such as these that have suffered; UK large-cap equity as a whole is unpopular. “The trend of the year so far has been to ‘risk off’, and that is unlikely to change given the prolonging of Brexit and wider geopolitical instability,” he says. 

Indeed, the UK is not the only unpopular region with investors. Some £2.1 billion was withdrawn from funds in September, bringing total outflows to £22 billion in the year to date. Alternatives, Equity and Property funds have seen the greatest outflows, while Fixed Income, Allocation and Money Market funds have enjoyed inflows for a sixth consecutive month from investors looking for safer options amid so much uncertainty. These assets saw net inflows of £583 million, £340 million and £206 million respectively in the month. 

FLows

At a firm level, BlackRock attracted the most money in the month, with inflows of £626 million. That compares with Invesco, which saw outflows of £967 million in September. Its Global Targeted Returns fund has continued to bleed asset as investors question the performance of Absolute Return funds and as market volatility creeps up. The fund has seen outflows of £2.3 billion year to date, leaving it with £10.3 billion of assets under management. 

Trackers Attract Investors

flows

The LF Wales PP UK Opportunities Fund attracted the greatest amount of investors' money in the month, at £643 million; it is one of just two active strategies among the top five by inflows.

Passive funds including AI US Equity Index and AI North American Equity Index funds, which track the FTSE USA and FTSE North America indices, saw inflows £574 million and £468 million respectively in the month. and are both up over 21.7% year to date.

The ASI Global Corporate Bond Tracker was also among the most popular funds in the month. The tracker, which follows the Bloomberg Barclays Global Aggregate Corporate Index, saw inflows of £386 million, bringing total assets to more than £2 billion.  

Lastly, the over £6 billion Royal London Cash plus fund has attracted £238 million. The fund, which invests in cash, deposits, money market instruments and short-dated government securities, has returned 1% year to date.

The Woodford debacle has caused many investors to doubt the expertise of active fund managers and question whether they are worth paying a higher fee for. Many experts predict that, in the wake of the Woodford fund closure, an increasing number of investors will turn to tracker funds instead as a cheaper, simpler way to generate returns. 

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.

About Author

Annalisa Esposito  is a data journalist for Morningstar.co.uk

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