Data released by the Investment Association, which represents the UK’s fund management industry, show that British retail investors put more than £4 billion into equities-based investment funds over April. Presumably motivated by the opportunity to profit from a recovery after stock markets crashed in March on the Covid-19 pandemic, the enthusiasm of small private investors helped prop markets up, with institutional investors slower to return.
The £4.2 billion poured into equities in April was still less than half of the £9.7 billion in outflows from funds over March, when coronavirus fears prompted a sell off that wiped over 30% of many major markets. However, considering the extent of that sell-off, is can be considered something of a surprise how quickly investor sentiment turned around.
The Investment Association is made up of around 250 members who represent financial services companies from pension and insurance funds and manage approximately £7.7 trillion in assets between them. Its market data is one of the most looked at indicators of sentiment among small, private UK investors.
Chris Cummings, the association’s chief executive commented that another interesting development appears to have been a shift in attitude towards investment funds branded as ‘responsible’ or ‘sustainable’. The coronavirus pandemic seems to have convinced more investors that they should be investing in such funds. Mr Cummings said:
“The crisis has brought a new momentum to the subject of responsible investing, with asset owners and retail investors asking more about their investment manager’s environmental, social and governance approaches.”
Another trend apparent in April’s data is something of a comeback for actively managed funds, which have seen a drop in popularity in favour of passive index trackers over the last decade. British savers invested £2.7 billion into active funds over April, compared to just £1.4 billion into passive funds.
That’s a major boost for the active fund management industry, which has struggled in recent years due to extensive media coverage of the fact a majority underperform much cheaper tracker funds. The long bull market created an environment in which it became especially challenging for fund managers to pick portfolios that, after fees, outperformed their benchmark indices.
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