Bond Funds Come to the Rescue - Again

Fund investors are not interested in any asset class beyond fixed income, if we are to believe UK asset flows data

Sunniva Kolostyak 17 August, 2023 | 9:14AM
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Fixed income

Only one fund category attracted any investment in July, and that’s fixed income. All other groups, but especially equity and allocation, suffered significant outflows – and for a second month in a row.

Overall, £698 million was added to UK-domiciled fixed income funds last month, but this was completely offset by the billions withdrawn from equity and allocation: £2.86 billion and £1.27 billion, respectively. Overall, the net outflow for July totalled £3.83 billion.

The trends seen in July largely follows what we’ve seen so far this year. The total outflow for 2023 has now surpassed £11 billion, and it’s again equity, followed by allocation, that have accounted for the lion’s share of redemptions. Fixed income has so far attracted £2.85 billion. The categories Other and Money Market are, unlike in July, in inflow territory – but barely.

Among the least popular Morningstar categories, we find two drivers for the large outflows from equity and allocation: Global Large-Cap Growth Equity and GBP Flexible Allocation, which each saw more than £1 billion redeemed in July. Within this category, Schroder Diversified Growth saw outflows of £633 million.

These two Morningstar categories were by far the least popular. As shown by outflows from the third-hardest-hit category: Property – Indirect Global. Its outflows were half of those seen by large-cap growth equity and GBP flexible allocation at £509 million. 

It's not all about the outflows, though. Some categories have remained popular this year too: Global Corporate Bond GBP-Hedged and GBP Government Bond had top category inflows of £546 million and £279 million, with HL Global Corporate Bond explaining nearly all the flow in the former (£529 million).

And despite the unpopularity of equities, Global Equity Income managed to secure the third-highest inflows of the month, with £256 million in July, and even £684 million this year.

On the fund house side, half of the 10 biggest fund groups saw outflows and the largest of all, totalling £921 million, belonged to Schroders. The redemption brings the group’s total beyond the £1 billion mark for the year, but only just – as of last month, the fund group’s net flows stood at a mere £130 million. Baillie Gifford had the second-largest outflows at £651 million.

Meanwhile, at the other end of the spectrum, Royal London attracted £521 million. As the fund group was about to surpass £10 billion worth of outflows for 2023 so far, these subscriptions have helped offset some of its medium-term pain.

Most of the funds experiencing redemptions were active vehicles, which bled £4.38 billion over the course of July. Meanwhile, passives saw modest inflows of £544 million. For context, about £825 billion is held in active funds in the UK, while £366 billion is in passive. 

Finally, there is one more trend now in its third month: sustainable-labelled funds suffered outflows. With July’s outflows of £1.16 billion, the yearly net flows also tipped into outflow territory. There was, however, no respite for those choosing to stay with non-sustainable labelled funds, as these funds suffered outflows too.


Correction: A previous version of this article reported incorrect data for Fundsmith Equity fund flows.

A note on methodology:

This report includes only open-end funds domiciled in the United Kingdom but not funds of funds. Where an open-end fund is likely to have a large institutional footprint, it will not feature in the calculations. Assets recycled into a strategy's different vehicle such as a segregated mandate are catalogued as outflows for the purpose of this report. Readers may wish to consider this nuance when deriving conclusions from the data.


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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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Sunniva Kolostyak

Sunniva Kolostyak  is data journalist for

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