Responsible investment funds are the winners of the coronavirus

Investors have poured more than £7billion into responsible funds so far this year, up from £1.9billion for the same period 12 months ago and marking a new record.  

Responsible investing funds saw a net retail inflow of £975million for the month, according to the latest Investment Association fund flow statistics for September 2020. 

Funds under management stood at £40billion at the end of September with their overall share of industry funds under management hitting 3 per cent.

Responsible investment fund flows have continued to break records this year

Responsible investment fund flows have continued to break records this year

Responsible investment fund flows have continued to break records this year

Chris Cummings, chief executive of the Investment Association, suggested the huge upswing in the popularity of investment funds styling themselves as responsible has been a result of savers wanting to commit to making a global positive change.

He said: ‘In a year clouded by uncertainty, responsible investment funds are a beacon for how savers can put their money to work to support positive change globally, and our industry can be proud that these funds are reaching new heights of popularity.’

Investing across the board has had a good year in 2020. Overall, savers poured £5.3billion into retail funds between July and September, more than three times the £1.2billion figure reported for the same time in 2019.

It reverses the flood of outflows seen as the coronavirus pandemic hit countries around the world and global lockdowns rocked markets.

Funds under management and net sales 
  Funds under management  Net retail sales 
September 2020  £1.3trillion  £1.6billion 
September 2019 £1.3trillion £1.1billion 
Source: Investment Association 

Cummings said: ‘It is also heartening that since the significant outflows in March, net retail sales have continued to recover into September. 

‘It remains to be seen just how significantly new Covid-19 restrictions and lockdowns imposed across the UK and internationally will affect investor behaviour as we head towards the end of 2020.’

UK funds took the biggest blow in September with net retail outflows of £321million. 

That being said, this was the healthiest inflow seen by UK equity funds since its May 2020 inflows of £449million. 

Every month between then and September has seen outflows of between £748million and £1billion.

The UK funds sector has been viewed unfavourably on the whole over recent years because of uncertainty surrounding Brexit, and now the handling of the coronavirus pandemic. 

Diversification is key

Overall, the best-selling sectors for September were global bonds, with sales of £937million, followed by global equity funds at £474million, indicating investors’ desire to spread their risk at a time of widespread uncertainty.

The ‘mixed investment 40 per cent – 85 per cent shares’ sector was the next best performing sector, with sales of £390million, providing further evidence that investors were seeking diversity in exposure.

Low risk assets also proved most popular in September. Fixed income trumped equities in September, with £1.2billion in net retail sales overall.

Equity funds lagged, with £93million inflows. 

The worst-selling asset class was property, which saw £18million of net retail outflows, while targeted absolute return funds were the least popular sector, with savers taking £266million out.

Popular regions for the month included North America and Europe with sales of £69million and £40million respectively. 

Asia and Japan funds proved less popular with respective outflows of £8million and a staggering £145million. 

Investors likely took fright following the shock announcement by Japan’s prime minister Shinzo Abe on 28 August declaring he would step down in September.

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