UK investors favour corporate bonds despite equities rally

UK retail investors are continuing to flock to fixed income funds, topping up their positions by over £500m last month, despite the rally in equities.

The UK Investment Management Association (IMA) revealed the top three best selling sectors in February were all fixed income – £ Corporate Bond, £ Strategic Bond and Global Bond – although sales have dipped slightly on the previous month.

Funds in the Corporate Bond space saw net retail sales of £254m, down from £303m in January, while Strategic Bonds saw inflows of £148m, well below the monthly average for the previous 12 months of £224m.

Global Bond had sales of £140m – a jump on the monthly average of £14m.

Equities still saw positive inflows of £249m overall, particularly in the Global Equity Income peer group which was the fourth best-selling sector. Investors’ appetite for dividend payouts led to £131m piling into the sector.

Mixed Investment 40-85% Shares sector was the fifth best seller while the North America sector had its highest inflow (£104m) for almost a year.

Overall net retail sales were £1.1bn for February.

However, UK ISAs (Individual Savings Accounts) continued their trend for outflows, with £126m retracted from accounts.

Richard Saunders, chief executive at the IMA, said: “Fixed income funds continue to be the most popular asset class. Equity sales were also positive in February following outflows in four of the last five months. Continuing buoyant markets helped funds under management to a record £615bn at the end of the month.

“ISA sales continue to show their recent weak trend with outflows of £126m. The pattern in recent years has however been one of sharp rebounds in ISA sales after the beginning of March as the ISA deadline looms. It is however too soon to say how pronounced a rebound next month’s figures will show.”


This article was first published on Investment Week

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