Fund sales are booming, here’s what investors are buying

Sales reached the second-highest level on record at the end of 2020. Hannah Smith examines the types of funds proving popular with investors.

Fund sales reached the second-highest level on record at the end of 2020 as vaccine optimism buoyed investor confidence.

According to the Investment Association (IA), net retail fund sales hit £6.2 billion in December, second only to November’s total. Active funds accounted for £5.2 billion for sales, while tracker funds took £962 million.

Responsible investment funds set a new record, attracting £1.1 billion in net retail sales in December.

By asset class, equity funds took the lion’s share of inflows at £2.5 billion, supported by strong sales of global equity funds, which took in £1.5 billion. Mixed Asset funds took £1.8 billion, while fixed income recorded £1.3 billion of sales.

However, property funds recorded an outflow of £73 million for December.

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Global sector tops the charts

The global sector was the top seller, recording net retail sales of £1.2 billion, followed by Mixed Investment 40-85% Shares, which posted an £838 million inflow. North America, Corporate Bond and Volatility Managed completed the top five best-selling sector line-up.

In contrast, the worst-selling sector for the month was UK Equity Income, with £501 million withdrawn.  

At the regional level, global was the top-selling geography, followed by North America and Asia.

Funds under management totalled £1.4 trillion in December following a “tumultuous year” in which they fell as low as £1.1 trillion at the end of March as volatility engulfed markets.

Strong sales for 2020

Looking at 2020 as a whole, net retail sales hit £31 billion, with inflows in the second and fourth quarters of the year both exceeding £10 billion. This is a huge rise compared to 2019, when total net retail sales only just reached £10 billion.

Active funds accounted for £12.4 billion of net retail sales last year compared to an £8.1 billion outflow in 2019.

Equity funds were the bestsellers by asset class, taking £10.4 billion over the year. This marked a significant reversal of the previous year’s £2.9 billion net retail outflow.

Responsible investment funds also had a very strong year, with net retail sales trebling to £10 billion over 2020 versus £3.2 billion in 2019.

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“December saw a continuation of the strong net retail sales of November, with the fund market buoyed to a positive end-of-year position,” says Chris Cummings, chief executive of the Investment Association. “Growing positivity around coronavirus vaccines helped boost stock-market performance in December, which in turn fuelled investor appetite for stocks and shares funds, with investors placing £2.5 billion into these funds throughout the month.

“The fund market accumulated strong sales over 2020 and ends a tumultuous year with record funds under management. Continued economic uncertainty, set against the progress made on a national vaccine roll-out, means we enter 2021 with cautious optimism.”