LONDON (20 November 2024) – After an upbeat Q2 driven by a positive ISA season, net sales turned negative in the third quarter with retail investors driving the downturn.
Only 38% of the U.K.’s largest fund groups saw net retail sales of onshore funds improve during the quarter. This is according to data from the Pridham Report by ISS Market Intelligence (ISS MI), which monitors sales and asset trends in the U.K. fund market using data supplied by over 45 of the largest fund groups operating in the U.K.
According to Benjamin Reed-Hurwitz, EMEA Research leader at ISS MI and lead author of the report, the data is reflective of uncertainty amongst investors potentially reaching a boiling point just as the September portfolio rebalancing period arrived.
Reed-Hurwitz commented: “Q3 is often a weaker quarter, and this year’s drop is not the largest in recent history. However, it is noteworthy that the weakness came predominantly in September – a time when we saw the US equity market wobble, the unpredictable US election was looming and fears over the potential consequences of the pending U.K. budget mounted.
“In particular, there seems to have been selling pressure ahead of possible capital gains tax increases. Offshore retail net sales also trended negative, adding to an overall picture of waning risk appetite and investment activity amongst retail investors.”
According to Reed-Hurwitz, gains and losses were notably uneven amongst fund groups, a fact that continues to reappear in the data.
He added: “As the wealth market in the UK has consolidated, it is more common to see partnerships between fund groups and distribution groups leading to larger wins and losses. As long as flows continue to consolidate, either by distribution groups consolidating or by flows consolidating from a fund selector view, such as through model portfolios, we can expect this choppiness to remain a feature of the landscape”
Momentum into passively managed funds notably shifted in the quarter, as these funds recorded significant declines in net and gross sales. Passive equity bore the brunt of the net sales decline in passive funds and may be a sign that investors both crystalised investment gains ahead of the U.K. budget and/or were diversifying away from the concentrated positions driving a number of equity indices. Passively managed funds, however, continued to post positive net sales compared to actively managed funds’ negative net sales rate.
| Rank | Fund group | Gross sales £m |
| 1 | BlackRock | £8,731.4 |
| 2 | Vanguard | £6,755.2 |
| 3 | Legal & General Investment Management | £5,407.4 |
| 4 | Fidelity | £4,920.2 |
| 5 | HSBC Asset Management | £3,823.7 |
| 6 | Royal London Asset Management | £2,591.0 |
| 7 | Artemis | £1,648.2 |
| 8 | Jupiter | £1,573.5 |
| 9 | Schroders | £1,426.9 |
| 10 | M&G | £1,336.4 |
| Rank | Fund group | Net sales £m |
| 1 | Vanguard | £1,595.5 |
| 2 | HSBC Asset Management | £962.3 |
| 3 | Fidelity | £723.3 |
| 4 | BlackRock | £453.3 |
| 5 | Artemis | £282.9 |
| 6 | Aviva Investors | £150.5 |
| 7 | Hargreaves Lansdown | £140.0 |
| 8 | Royal London Asset Management | £139.0 |
| 9 | Orbis Investments | £126.6 |
| 10 | Rathbones | £46.6 |
Vanguard and Fidelity International stood out in terms of passive fund net sales resilience, leading to the funds groups’ achieving 1st and 3rd retail net sales rankings.
While passive equity funds experienced the largest net sales decline, active bond funds led on a declining gross sales basis. The income arena, however, was anything but quiet with more evidence that equity income strategies are gaining traction.
Reed-Hurwitz commented: “That multiple fund groups found success with equity income strategies in Q3 could either be a response to falling interest rates across the U.S., U.K. and Europe, which has left cash savings looking less attractive, or a move to diversify equity exposures. This builds on a trend already started in the second quarter which influenced which fund groups performed well.”
Artemis was the leading active manager in the retail net sales rankings. The firm had multiple funds achieve recent success with Q3 being led on gross sales by the popular Artemis Income fund and net sales led by the Artemis SmartGARP Global Emerging Markets Equity fund.
Aviva and Jupiter’s movement in the rankings also had an income component to them. Jupiter’s net sales were led by the Jupiter UK Multi Cap Income fund, while Aviva Investors’ Global Equity Income fund was its top net seller. Aviva’s mixed asset funds also showed strength.
Other notable movers included Orbis, which continued to grow its U.K. net sales. The firm moved into 9th position, from 15th last quarter, with the Orbis Global Balanced leading the way.
Net flows into sustainable funds also appeared to be improving after a tough period for this part of the market. According to Reed-Hurwitz, this presents cause for optimism.
He commented: “While the delayed implementation of the fund labels under the Sustainable Disclosure regime may continue to hamper such sales in the short-term, outflows slowed significantly for many fund groups in Q3. If this signals that the resetting of investor expectations and appetite coming out of the post-Covid boom is largely complete, then the upside for sustainable funds may start to shine brighter than the downside.”
Reed-Hurwitz concluded: “Q3 ended in limbo. An unwelcome result for many fund groups after generally positive sales in the months leading up to – and coming out of – ISA season. With the U.K. budget, that lent heavily on increased taxation, and US election behind us, will investors be encouraged to look long-term again? “
The Q4 report will most definitely be one to watch as, if we see a return to the sunnier times earlier in 2024, this could foretell a boom in 2025’s sales figures.”
For more information and to access the full report, visit https://page.issmarketintelligence.com/mi-uk-pridham-report
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