Record quarter for fund of funds sales

Date: Thursday, November 5, 2009
Author: Katrina Baugh, Investmentweek.co.uk

Net retail sales of fund of funds soared to their highest ever level in Q3 to £1.4bn, more than four times the £297m recorded in the same period last year.

The most popular fund of funds sector during Q3 was Unclassified, accounting for net inflows of £412.9m, followed by Cautious Managed on £362.3m, according to IMA figures. In total, sales rose 17% on Q2’s figure of £1.2bn.

Funds under management for the sector also reached a record high of £39.3bn, which is a rise of 21% on the previous quarter (£32.5bn) and 27% up on Q3 last year.

Balanced funds accounted for the majority of funds under management, representing 63% of assets, followed by 19% in Equity funds. The number of fund of funds available has also increased by 49 from the 369 offered a year ago.

Meanwhile, sales of tracker funds in Q3 were well down on the previous quarter at £79m  compared to £259m in Q2. However, they had a better showing than during Q3 last year, when the sector saw net outflows of £34m.

Funds under management in trackers increased to £26.5bn in the last quarter, 23% up on Q2 (£21.5bn) as equity markets started to pick-up.

There was also positive news for ethical funds, with net sales reaching £59m in Q3 2009. This was a reversal of the previous quarter's £18m outflow and more than double the £21m net sales in Q3 last year.

Total ethical funds under management were £5.5bn in Q3 2009, up 22% on the previous quarter's figure of £4.5bn.

Funds under management across all the IMA sectors hit £463.4bn in September 2009, with total net retail sales of £7.2bn in Q3 2009.

Richard Saunders, chief executive at the IMA, comments: "The third quarter saw a continuation of the strong inflows to funds that have been a feature of 2009 so far. That trend is being seen in these statistics. Funds of funds net sales in the third quarter were the highest on record, and tracker and ethical sales have both picked up encouragingly compared with this time last year."

Thames River co-head of multi-manager Rob Burdett says the sales figures show advisers are becoming increasingly convinced of the fund of funds solution.

"IFAs have been consistent investors in multi-manager throughout the crisis and certainly at Thames River we have seen it pick up recently, with three record sales months in a row," he says.

"We expect it to continue into Q4. October for us was our best ever sales month, taking £40m. If we do not see any more shocks in the market, it is logical for sales to broaden out across all sectors, not just fund of funds."