Top equity funds near capacity as ‘great rotation’ raises inflows

The ‘great rotation’ out of fixed income and into equities is pushing funds’ assets towards maximum capacity, which could result in top-performing funds soft-closing in the coming months.

Investment Week understands Richard Pease’s £510m Henderson European Special Situations fund has reached full capacity and the group may announce plans to stem flows shortly.

The portfolio has a mid- and small-cap bias, with 75% of assets invested further down the market-cap spectrum.

Pease (pictured) has previously told a number of his fund backers the group will cap the portfolio at £500m to protect existing investors.

At the end of May, the fund had £393m under management, but during the last seven months assets have swelled to £510m following renewed investor interest in European equities. Henderson declined to comment.

The £157m Fidelity UK Smaller Companies fund, managed by Alex Wright, is also monitoring flows, having doubled in size during the last six months.

Fidelity is understood to be planning to soft-close the fund at £250m, which it should reach in three months’ time if it continues to attract the same level of inflows seen in the second half of last year.

“We initially planned to limit the fund’s size at around £250m, adjusted for market movements, in order to protect Alex’s flexibility. This remains our plan and we are monitoring flows,” said a Fidelity spokesperson.

“At this stage, no decision has been made regarding the mechanism we will use to control flows.”

Earlier this month, the latest Bank of America Merrill Lynch fund management survey concluded asset allocators are now investing the highest amounts of their portfolios in equities since February 2011, with a net 51% of investors overweight the asset class.

Equities were the best-selling asset class for the third month running in November, according to the latest IMA sales figures. Net retail sales for equities amounted to £720m, the highest figure since the asset class attracted £1.25bn in April 2011.


This article was first published on Investment Week

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