Sunniva Kolostyak: Welcome to Morningstar. It’s been a year of records for UK funds, and with me today to check out the fund flow numbers is Jack Fletcher-Price.
So, Jack, talk me through the headline numbers please.
Jack Fletcher-Price: So, in 2022, we saw £23 billion of net outflow from UK open-ended funds space, and the bulk of this activity happened in Q3, where equity strategies alone saw £16 billion redeemed. As a whole year, on an absolute basis, equity strategies saw their largest ever outflow; but on a relative basis, the 2016 outflows were actually more severe. This year was a continuation of some might say exacerbation of some of the trends we’ve seen of flows going to passive and sustainable strategies. Sustainable strategies saw £26 billion of inflow, which isn’t as large as the 2021 figure, but non-sustainable strategies or strategies not labeled as sustainable by their asset manager, saw £50 billion of outflows.
Kolostyak: So, on a category level, if you dig a bit down into the numbers, what have you seen there?
Fletcher-Price: So, as you might expect, we saw flows to global and sterling inflation-linked bonds. We also saw flows to short-term corporate bonds, which might be a sign that investors were trying to manage their duration risk as we saw an elevated rate volatility in 2022.
Kolostyak: Is that due to the spike in bond yield that we saw around the time of the mini budget this year?
Fletcher-Price: There was definitely elevated levels of flows around that period.
Kolostyak: So, on a fund level then, which funds have you seen have massive outflows and which have maybe done a bit better this year?
Fletcher-Price: So, capital preservation strategies offered by Ruffer and Troy saw positive inflows this year and they were among the largest inflows. And as you can expect, it was mainly growth-orientated strategies that dominated the top outflows.
Kolostyak: But if growth then has been quite unpopular, I’m assuming there are a couple of asset managers as well who have maybe not done as well as they could have.
Fletcher-Price: Some of the active asset managers such as Baillie Gifford, Columbia Threadneedle and Janus Henderson did see a lot of outflows, whereas some of the asset managers that have passive offerings such as BlackRock, Aberdeen, and Fidelity were able to mitigate some of the outflows from their active strategies.
Kolostyak: Now, new year. Do you have any predictions for whether any of these trends will continue this year as well?
Fletcher-Price: So, as the rates hiking cycle slows down, it would be interesting to see how investors position themselves in fixed income and in equities.
Kolostyak: Well, Jack, thank you very much for being here today. For Morningstar, I’m Sunniva Kolostyak.
