Second best year for fund sales, here’s what investors bought

We detail the types of funds that proved popular with investors.

4th February 2022 10:13

by Kyle Caldwell from interactive investor

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We detail the types of funds that proved popular with investors.

Demand for funds was high in 2021, and for overall sales it was the second best year on record. Figures from the Investment Association (IA) show £43.4 billion was invested over the year, only beaten by sales of £48.6 billion in 2017.

Active funds proved more popular than trackers, with £25.2 billion invested versus £18.3 billion. This is a notable rise compared to 2020 when active fund sales accounted for £12.4 billion. In 2020, overall fund sales came in at £31 billion.

Responsible investment funds also had a strong year, with £16 billion invested. This was £4.3 billion higher than in 2020.

In terms of asset classes, equity funds proved the most popular, with £14.8 billion invested. Fixed-income and mixed-asset funds were also in high demand, with more than £10 billion invested in each.

The best-selling sector was global equities, which was also most in demand in 2018, 2019 and 2020.

UK funds were heavily out of favour, with investor withdrawals hitting a record £5.3 billion in 2021. This is larger than the previous record of £4.9 billion in 2016, when the UK voted to leave the European Union.

Similar trends played out with interactive investor customers. Of the 20 bestsellers in 2021, 12 are global funds. The top three were: Fundsmith Equity, Vanguard LifeStrategy 80% Equity and Baillie Gifford Positive Change.

UK funds were not completely out of favour, with three making the top 20, namely Marlborough Nano Cap Growth, MI Chelverton UK Equity Growth and Marlborough UK Micro-Cap Growth.

In December, fund sales came in at £2.3 billon. Equity funds were the most-popular asset class, with £1 billion invested.

Global equities remained the best-selling sector for the seventh consecutive month, attracting £834 million. UK funds remained unpopular, with £899 million withdrawn.

Tracker funds outsold active funds in December, with £1.3 billon invested compared to £930 million for active funds.

Chris Cummings, chief executive of the IA, said:“Investors put their lockdown savings to work in 2021, with near record inflows to retail funds in 2021 helping investors take part in the global Covid-19 market bounce-back. This was particularly so in the first half of the year, when monthly inflows into funds peaked at £6.2 billion at the end of the 2021 ISA season in April.

“While new variants of Covid-19 appeared throughout the year, every month of 2021 saw net inflows against a backdrop of rising prices eroding the value of saving in cash.

“The return of significant inflation in the second half of 2021 left its mark, with falling flows into bond funds, but overall investor confidence remained resilient. Growing focus on climate change in the year that Glasgow hosted COP26 also helped take flows into responsible investment funds to new heights.”

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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