Equity funds received their first monthly inflows since February last month, according to the penultimate fund flow report of 2022 compiled by Morningstar’s manager research team. But November inflows bucked this year’s trend of equity funds being consistently out of favour with investors. Fixed income funds remained popular and look set to be only category to see positive inflows for 2022 as a whole.
Allocation funds were another category to see a positive month, while alternatives, property funds and money market funds saw outflows last month. Again, active funds bore the brunt of the outflows, maintaining the trend of the last 12 months. Sustainable funds brought in another £1.6 billion, making it nearly £25 billion for the year to the end of November.
Overall, funds received £2.6 billion of inflows in November, with equity funds making up the majority of this increase, with £2.3 billion invested.
Fixed income wasn’t too far behind, bringing in £1.9 billion last month. As a category, money market funds saw the biggest outflows, shedding £1.5 billion, meaning £2.4 billion has been withdrawn from them in the last twelve months. Money market funds, which invest in liquid assets like short-term bonds and cash and are used by investors to "park" money, saw the highest level of outflows since February 2020, according to Jack Fletcher-Price, associate analyst, manager research, Morningstar.
Staying with the top-level numbers, passive funds continued to beat their active equivalents, maintaining the trend of the last 12 months. Passive strategies pulled in £4.5 billion in November, while active funds shed £1.9 billion. Over the last 12 months, £8.6 billion has been invested in passive funds, and £26 billion taken out of active funds. Still, active funds kept the upper hand in terms of assets, with £860 billion versus £338 billion for passive funds. At current rates, it will take passive strategies a number of years to catch up – but reaching the half-way stage isn’t too far off.
Investors Follow the Money
Drilling down into the fund categories, US Large-Cap Blend Equity was the most popular in November, bringing £1.6 billion of inflows, with Global Large-Cap Blend Equity next. The inflows into these categories coincided with a bounce for US large-caps in November (see this performance chart of the Morningstar US Large Cap index) so in that sense investors were following the money. Whether that holds up in December in terms of flows is hard to tell. But investors have lost their enthusiasm for risk assets in recent weeks so this may translate into lower flows into these categories in the last month of the year.
At the bottom of the pile was GBP Money Market – Short Term, which saw £1.3 billion in outflows. UK Large-Cap Equity also saw £1 billion of outflows last month, taking the year’s deficit to £11 billion. Still, the category held £128 billion of assets at November's end.
Moving on to fund houses, BlackRock had the best month, pulling in £1.5 billion of investor money, its largest inflow in over two years, followed by Aviva with £957 million and Legal & General with £939 million. Lower down the list Royal London took £192 million of inflows, Vanguard £151 million and Fidelity £101 million, according to Morningstar Direct data.
Asset managers seeing outflows last month include Abdrn (-£175 million), Baillie Gifford (-£288 million) and Columbia Threadneedle (-£403 million). Firms seeing the biggest outflows over the last 12 months, which includes December 2021, include Baillie Gifford, Aviva and Schroders. In terms of assets, BlackRock towers over its rivals, with £171 billion in fund money, while the next biggest provider is Aviva with £78 billion. Royal London is not far behind with £71 billion in assets.
Funds Ebb and Flow
Finally, looking at individual funds, Hargreaves Lansdown’s newly launched US fund received the biggest inflow in November, of £613 million, and L&G Global Inflation Linked Bond Index fund brought in £383 million. CT UK fund saw the biggest outflow with £334 million of money pulled out.
For the last 12 months, Royal London Short Term Money Market fund attracted £1.83 billion of investor money, followed by LF Ruffer Diversified Return fund with £1.63 billion. Baillie Gifford Diversified Growth is at the other end of the table with £2.4 billion of outflows.
Despite this year’s trends – equity funds out of favour, bond funds very much in – it’s worth noting that equity funds still hold the lion’s share of assets. After November’s flows, equity funds make up £778 billion out of total of £1.19 trillion of assets. That dwarfs the next biggest category, fixed income, in which investors hold £205 billion of assets. Allocation funds are the next biggest category with £169 billion.
Next January we’ll get the full flow data for 2022 so we’ll be able to dissect the trends for the whole year. Bond funds are likely to end the year triumphant over equities.
