UK fund market saw record high sales of £8.3million in November

Investors rushed to plough money into funds as the vaccine rally and US election arrived in November 2020, the latest data from the Investment Association has confirmed.

The race to invest saw net retail fund sales reach a record monthly high of £8.3billion, half of which went into equity funds invested in shares.

The optimism driven by news of successful coronavirus vaccines and the seemingly-settled election in the US of Joe Biden, despite President Trump disputing the result, delivered a level of investment significantly higher than the previous record of £5.7billion net retail sales in September 2017. 

Global Equity funds were the biggest winner, with their own record-breaking net retail sales of £1.7billion, but UK All Companies funds continued to struggle with £425million pulled out overall in November.

Net fund retail sales reached a record monthly high of £8.3billion in November 2020

The figures are released with a time lag and it remains to be seen whether anticipation of a potential deal, followed by that coming to fruition just before Christmas, will see a reversal of fortune for UK funds in December.

In November, stock market-invested funds as a whole did well with a total net retail equity fund sales of £4.1billion, as investors bet on a way out of the coronavirus pandemic with news of a vaccine breakthrough.  

US politics also had a big part to play in investor confidence, as November saw Democrat Joe Biden’s election victory over Republican Donald Trump. 

Despite President Trump disputing the election, investors took it that the matter was largely settled and another big stimulus package would be on the way to further boost share prices.

Unsurprisingly therefore, funds in the North American sector were the fifth best-selling for the month with inflows of £533million. 

This is a huge increase from the mere £14million in sales for US-focused funds in October, and an outflow of £34million the month before that. 

The second best-selling sector for November was Mixed Investment 40-85% Shares with inflows of £993million followed by Global Bonds at £911million.

The worst-selling sector was UK All Companies with an outflow of £425million. This follows on from a loss of £214million in the previous month.    

Property funds have had a torrid time of late, with many being forced to suspend trading 

Shares lead the way as they outstrip bond funds 

In terms of asset classes, shares were the biggest beneficiaries with stock market-invested equity funds enjoying net retail sales of £4.1billion. Fixed income also saw positive flows of £1.2billion. 

Property funds experienced net outflows of £147million. Four leading open-ended property funds remain closed including Janus Henderson’s £1.8billion UK Property PAIF and M&G’s £2.1billion Property Portfolio. 

While global equity funds topped tables by a way, other regions also saw positive flows showing investors still believe diversification is still the best medicine for a healthy portfolio.

Asia funds were the second best-sellers, with inflows of £688million, followed by North American funds at £642million. 

European funds were also in the green, with inflows of £244million though UK equity funds, once again, saw outflows of £461million. 

Tracker funds saw £3billion added in November and in total amounted to £251billion under management. Their overall share of industry funds stands at 17.9 per cent.

Responsible investment funds continued their positive trajectory with £1.1billion added and funds under management stood at £43billion by the end of the month. Their overall share of industry funds under management was 3 per cent. 

When will the tide turn on UK shares? 

The rush out of UK stock market invested funds was not as significant as the £782million outflows in October or  the huge £1,047million in June. 

While we do not yet know the total flows for 2020, it is likely to remain in the negative territory for UK equity funds when the data is released next month. 

Whether it will be higher or lower than the £1,235million pulled out in 2019, remains to be seen.

However, the start of 2021 has seen a rush back into UK shares despite fresh lockdown, off the back of a Brexit deal and optimism over vaccination. The FTSE All-Share climbed almost 6 per cent in the first trading week of January, off the back of this.

This has led to questions over whether the tide has finally turned for the UK stock market and the year ahead will see more back British companies.

This post first appeared on Dailymail.co.uk