Retail investors flooded into fixed income in April as rising interest rates pushed up bond yields.
Some £1.1bn was invested in fixed income funds in April, taking the total investment into the sector so far this year to £4bn, according to data from the Investment Association.
Bond prices crashed last year after central banks hiked interest rates at high speed, pushing up yields and ending a decade of ultra-low returns in the sector, meaning that investors can gain similar returns from less risky investments.
AJ Bell chief executive Michael Summersgill recently told FTAdviser's sister title the Financial Times that he has never seen the current level of gilt and fixed income purchases by UK retail investors.
Investors placed £274mn into UK government bond funds in April, with £173mn invested into sterling-denominated corporate bond funds.
By comparison, equity funds dropped in popularity with £93mn invested on a net basis in the month, compared with £686mn a month before.
In total April saw £1bn more in net flows than the previous month, with investors putting £2.8bn into funds.
Fund sales
Funds Under Management | Net Retail Sales | Net Institutional Sales | |
April 2023 | £1.4tn | £2.8bn | -£2.0bn |
April 2022 | £1.5tn | £608mn | -£1.6bn |
Source: Investment Association
All asset classes saw inflows, with money market funds seeing £1.1bn invested and tracker funds seeing £1.6bn.
The worst selling sector was UK All Companies, which saw outflows of £1.1bn. A total of £10.6bn has been pulled from the UK All Companies sector over the past 12 months.
Institutional investors saw a marked difference in sentiment, pulling £2bn from funds in April, following net redemptions of £11bn in March.
August last year saw the only net inflow from institutional investors since April 2022, with £8mn invested.
Chris Cummings, chief executive of the IA, said April saw a “surge” in consumer confidence.
“This month, we have seen investors opt for a cautious approach favouring bond funds, and choosing globally diversified equity funds.”
Emma Wall, head of investment analysis and research, Hargreaves Lansdown said the asset management industry can “breathe a sigh of relief” as investors are buying funds again.
But confidence in equity markets remained down in April, she said.
“Concerns about inflation are in part to blame, as were less-than-rosy economic forecasts,” she said.
“Persistent warnings of a downturn in the developed world spooked many investors into lower risk assets.”
sally.hickey@ft.com
