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Fund outflows continue as investors seek diversity

Investors continued to pull money out of funds in January, according to the Investment Assosication data.

Targeted absolute return topped the worst-selling sector list for the fourth month in a row in January.

Overall, investors continued their cautious sentiment. While investors withdrew slightly less from funds overall than the month before – £859m, compared to £875m in December – some sectors experienced their largest outflows for more than a year.

AJ Bell personal finance analyst Laura Suter notes European equity funds experienced their biggest redemptions for two and a half years.

She says: “Outflows from European equity funds ramped up to their highest level since the ‘Leave’ vote in 2016, with £412m withdrawn from the funds.

“The outflows from UK Corporate Bond funds were the highest in more than three years, at £491m. Instead, investors flooded into strategic bond funds last month, deferring the decision about bond allocation to fund managers, with £801m flowing into the funds – the highest inflows in a year.”

Strategic bond topped the list of the best selling sectors with £801m inflows, followed by by Mixed Investment 20-60% Shares with net retail sales of £424m, and Mixed Investment 40-85% Shares with net retail sales of £217m, as investors are hoping mixed asset strategies will combat a risky macroeconomic environment.

Investment Association chief executive Chris Cummings says: “Dry January extended to the fund markets as savers remained cautious, heralding the fourth consecutive month of net retail outflows. The threat of a no-deal Brexit, Eurozone instability, and international trade tensions, combined to dampen investor appetite with savers looking towards mixed asset funds to spread their risk.”



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