The realignment of Standard Life's giant with-profits fund, which brought a massive sell-off of equities, has left the investment industry with its first quarterly net outflow for almost 12 years.
According to a confidential report, overall institutional repurchases of £2.2bn during the first quarter of this year outstripped net retail sales by £85.3m, leaving a net outflow for the first time since the third quarter of 1992.
The report says the bulk of the repurchases – £1.8bn – stemmed from Standard lowering the equity exposure in its £31bn with-profits fund to meet the FSA's tough new realistic reporting requirements.
Overall, 40 per cent of the groups which provided figures for the quarterly report sustained net repurchases over the first three months of 2004. Scottish Widows, for example, saw more than £170m flood out of its corporate bond fund, much of which appears to have ended up in Halifax's bond fund, which had inflows of more than £270m.
Widows, however, still managed to be the among the biggest sellers of Isas and multi-manager funds in the quarter. The company was placed fourth in Isa business in gross terms, with £122m of sales, behind Legal & General with £130m, Fidelity with £134m and Halifax with £156m.
Although many bancassurers suffered from a minor sales slump due to the waning popularity of corporate bond funds, a number of fund managers saw big rises. Invesco Perpetual, for example, saw its Isa sales rocket to £56m from £37m.
A spokesman for Standard Life, which has recently launched its Sigma platform, says: “For many years, the main UK with-profits fund has achieved some of its overseas equity exposure via a unit trust managed in house.A number of the overseas equities we sold in the first quarter of 2004 were in this trust.
“When we sold them the units were cancelled and this is what has caused the unusually high level of institutional repurchases. Clearly, an equity disposal on this scale is not a regular occurrence.”