The persistent flow of assets out of UK funds continued in March, reaching a net £11.78 billion for the first quarter of the year, according to fresh Morningstar data.
In March, fixed income became the asset class with the largest net outflow at almost £5 billion, eclipsing the £1 billion worth of equity redemptions.
In February, every single asset class saw outflows, and March did not prove much different. In fact, money market and property funds were the only two classes that showed small inflows.
“Equity strategies extended losses and have not seen a quarter of net inflows since the third quarter of 2021,” says Giovanni Cafaro, manager research analyst at Morningstar.
However, the March figures are looking more moderate than some of the numbers seen last summer – as shown in the chart below.
Within fixed income, £3.15 billion of the withdrawals came from Global Bond – GBP Hedged. According to Cafaro, a portion of the net flows out of fixed income could be directly attributed to outflows from SSGA’s Global Aggregate Bond Index Sub-Fund and US Treasury Bond Index Sub-Fund as part of a large client rebalance. Moreover, Ninety One’s EM Local Currency Debt Opportunities fund saw its assets transferred to another vehicle in a different jurisdiction.
However, not all bonds struggled to gain popularity. Global Corporate Bond – GBP Hedged attracted £452 million, gaining enough traction to become the third most popular category in March.
Global Large-Cap Blend Equity saw the largest sums added in March, at £863 million, taking the yearly total past £2 billion. US Large-Cap Blend Equity and US Large-Cap Equity strategies attracted a combined inflow of £1.6 billion in March, though partially offset by slight outflows from value-orientated funds.
The equity categories dragging the asset class flow figures down were UK Large-Cap Equity and UK Equity Income, seeing £948 million and £811 million in withdrawals, respectively.
Even passive strategies were hit with outflows this past month.
Indeed, investors withdrew £1.33 billion, but over the quarter, the category has still attracted £3.74 billion. Active funds suffered £5.35 billion in outflows in March, bringing quarterly redemptions past £15 billion.
“Passive funds continue to dominate the top five inflows, with four of them featured in March, mirroring trends seen in prior months,” Cafaro says.
Moreover, funds with a sustainable mandate have tended to be more resilient to redemptions over the past year, but this was not the case in March. Outflows hit £202 million, but this is still significantly less than the £4.95 billion taken from funds without a sustainability label.
Among the biggest fund companies BlackRock, HSBC, and Legal & General saw strong net inflows, at £1.25 billion, £818 million, and £477 million, respectively. This is in line with the better resilience of passive strategies when compared with their active counterparts.
Baillie Gifford’s £1.15 billion outflow was the largest in march, followed by Vanguard at £437 million and Royal London at £213 million.
