ESG fund sales triple as active fund sales soar in December

Net retail sales reached £6.2bn in December 2020, in the second largest monthly net retail sales figure on record after November 2020, data published today by the Investment Association (IA) has revealed.

The other key findings for December include:

• Active funds saw net retail sales of £5.2bn in December, just below the record inflow of £5.4bn in November 2020, while tracker funds attracted £926m.
• Responsible investment funds attracted a record £1.1bn in net retail sales in December 2020.
• Equity funds were the best-selling asset class in December, attracting net retail sales of £2.5bn, buoyed by strong net retail sales to Global equity funds of £1.5bn. 

The UK's funds under management (FuM) reached a record £1.4trn at the end of 2020, after a tumultuous year where FuM reached as low as £1.1trn at the end of March. Other key findings for the year include:

• Net retail sales for 2020 reached £31bn, with inflows in Q2 and Q4 both exceeding £10bn. Total net retail sales for 2019 only just reached £10bn. 
• Responsible investment funds saw net retail sales treble to £10bn in 2020, compared to £3.2bn in 2019.
• Active funds attracted £12.4bn in net retail sales in 2020, compared to outflows of £8.1bn in 2019.
• Equity funds were the best-selling asset class in 2020 attracting £10.4bn, buoyed by strong net retail sales in Q2 and Q4 and a significant reversal of 2019's £2.9bn net retail outflows.

Chris Cummings, chief executive of the Investment Association, said: "December saw a continuation of the strong net retail sales of November, with the fund market buoyed to a positive end-of-year position. Growing positivity around coronavirus vaccines helped boost stock market performance in December which in turn fuelled investor appetite for stocks and shares funds, with investors placing £2.5bn into these funds throughout the month."

"The fund market accumulated strong sales over 2020 and ends a tumultuous year with record funds under management. Continued economic uncertainty, set against the progress made on a national vaccine roll-out, means we enter 2021 with cautious optimism."

Laith Khalaf, financial analyst at AJ Bell, commented: "The tale of 2020 gets weirder and weirder, as more data emerges showing the big disconnect between markets and the global economy. Investors pumped huge amounts of money into funds over the course of the last year, despite the pandemic laying waste to global economic activity."

"There are two main reasons for investor optimism. Economic performance has been dented by the voluntary actions of international governments, and a strong recovery is expected when those artificial restrictions are lifted. The second reason is loose monetary policy. Low interest rates have given investors nowhere else to go apart from the stockmarket to get a real return on their money. So goes the story of the last 12 years."

"The lion's share of equity flows went into the global sector over the course of 2020, and flows were particularly strong at the tail end of the year, which is likely a vote of confidence from UK investors in the election of Joe Biden as US President. Meanwhile UK equity funds continue to struggle to get anyone to touch them with a bargepole. For the fifth year on the trot, money gushed out of UK equity funds, to the tune of £2.8bn in 2020, and £16.4 billion since the beginning of 2016. It remains to be seen whether a successful vaccine roll out arrests the declining popularity of the UK sectors in 2021."