2024 is markedly a consequential year for the world, with more than half of the world’s population going to the polls, as well as the lingering shadow of war and megatrends like artificial intelligence (AI) set to transform the global political, economic, and social landscape.
Despite all of this, investors are standing firm. Most asset classes did see outflows at the start of the year, but at modest levels.
Equity Funds Hit Hardest
In January, fixed income, property, money market, and alternative categories all suffered net outflows, at £25 million, £68 million, and £109 million respectively. Equity funds were hit hardest with a loss of £681 million, Jack Fletcher-Price, associate analyst at Morningstar, finds. Allocation funds bucked the trend with a £162 million inflow.
This marks the continuation of a depressing trend for the asset class, as equity strategies have failed to record a single month of net inflows over the past 12 months.
The picture was brighter for a select few categories. Global Large-Cap Blend Equity and US Large-Cap Blend Equity both had net subscriptions over the month, at £512 million and £329 million, respectively.
However, the UK-Flex Cap Equity category led the pack for the most outflows, shedding £457 million in January, with Global Large-Cap Growth Equity not far behind with £252 million in redemptions.
Fixed income categories also experienced both gains and losses in January. Global Corporate Bond brought in £328 million, whilst Global Corporate Bond – GBP Hedged and Other Bond attracted £191 million and £180 million, respectively.
Meanwhile, GBP Corporate Bond and Global Flexible Bond – GBP Hedged fell out of favour, recording net outflows of £368 million and £348 million.
Beyond category trends, January also marked the continuation of flows out of active funds and into passive vehicles.
Morningstar data finds that passives attracted over £2.51 billion whilst investors simultaneously pulled around £3.29 billion from active strategies.
Passive Funds See Inflows
It is no surprise that three passive funds were in the top five for inflows for the month.
The iShares ESG Overseas Corp Bond Index fund (UK) took the top spot bringing in £339 million, and it was swiftly followed by the iShares North American Eq Idx Fd (UK) which gained £249 million, and the iShares UK Equity Index Fund (UK) which brought in £183 million.
The flows into these passive vehicles, managed by BlackRock, helped boost the fund house to the top spot for the largest inflows at the start of the year, adding a total of £689 million to its assets.
Among active funds, the two absorbing the biggest inflows were the popular M&G Japan fund, managed by Carl Vine, at £204 million, and TM Ruffer Portfolio fund at £237 million.
But, active funds occupy all of the top five spots for outflows in January.
Federated Hermes S-T Sterling Prime saw the biggest redemptions, with £280 million, and Terry Smith’s Fundsmith Equity started 2024 with outflows reaching £190 million.
The JOHCM UK Dynamic fund was blighted by £198 million in net outflow around the same time as it was announced that its manager Alex Savvides will be departing for Jupiter later this year. And, Schroder All Maturities Corporate Bond saw redemptions of £167 million.
Which Fund Managers Attracted Flows?
On the fund house side, BlackRock was not the only fund group to attract inflows in January. This was also the case for Legal & General (£370 million), Vanguard (£186 million) and HSBC (£169 million), too.
Baillie Gifford continues to suffer from growth equity strategies remaining out of favour with investors. The fund group’s outflows hit £537 million in the month of January alone, after seeing over £7 billion in withdrawals across 2023.
Embattled Abrdn also saw outflows of £125 million, whilst Schroders reported a loss of £115 million.
