UK funds drop 11% in October

Date: Friday, November 28, 2008
Author: Mark Cobley, Wealth Bulletin

The UK's fund management industry, which is the largest in Europe, continued to suffer client outflows as well as falling markets during October, according to the latest sales statistics from the Investment Management Association. Total assets under management fell 11% to £339bn (€405bn) after the fifth consecutive month of net outflows.

Withdrawals from institutional clients dwarfed those from retail investors, continuing a trend in place since the summer. Since June, institutional investors - including discretionary wealth managers as well as pension funds - have pulled a net £5.9bn from UK-domiciled funds, while retail clients have only taken out a net £909m.

Richard Saunders, chief executive of the IMA, said: "October's outflow meant that in three of the last four months retail investors have been net sellers of funds. But the October outflow remains relatively modest compared to funds under management at around a quarter of one per cent. For the first ten months of 2008, retail investors have added some £1.3 billion to their holdings. There are no signs of large scale selling by retail investors."

Nevertheless, for the industry as a whole, the sales figures confirm 2008 as the worst year for the onshore UK funds industry since 1998, when the IMA's figures begin. A year-to-date total outflow of £2.5bn compares to a net inflow of £3.9bn during 2007, which was the second-worst year on record.

During the past 12 months, the total assets managed in unit trusts and Individual Savings Accounts - ISAs - has dropped 30%, from close to £500bn to £339bn, due to a combination of client withdrawals and tumbling stock-markets.

The most popular of the IMA's fund sectors during October proved to be global growth, which refers to funds that invest at least 80% in equities and which have the prime objective of achieving growth of capital. Global growth funds took in a net £147m - overwhelmingly from institutions.

The least popular sector was UK equity income, referring to funds that try to pick the shares most likely to generate dividends, in contrast to the growth style. Equity income funds in the UK recorded net outflows of £563m during October, again overwhelmingly from institutional investors.

--write to mcobley@efinancialnews.com