Funds investing in UK equities have suffered net outflows of £1.4bn during September, while fixed income remained in favour, according to the latest monthly report on UK-domiciled funds from Morningstar.
According to the report, a net inflow of £220m into the Vanguard FTSE UK All-Share index was not enough to offset the £500m outflow from the equivalent State Street UK Equity Tracker, contributing to total net outflows of £1.4bn from UK equities, while UK equity income also suffered redemptions.
"Performance has often been poor in both cases, but especially in the case of UK equity income where year to date to the end of September the average fund lost almost 24%," the report said.
"UK equity income strategies by Threadneedle, Artemis, and Invesco saw the highest net outflows, but this was mainly due to them being among the largest in the category. Almost 80% of funds in the category saw net outflows in September."
The story was similar in Europe ex-UK equity funds, where a £188m net subscription to the Baillie Gifford European fund was "trumped" by a large outflow from the State Street Europe ex UK Equity Tracker, leading to total outflows of £774m from the category in September.
Alternative funds, which saw inflows slow over the last few months, also returned to high net redemptions in September, suffering a net outflow of £1bn. Within property, one of the largest strategies, Threadneedle UK Property, suffered a withdrawal of £68.5m during September, having been reopened that month.
However, fixed income as an asset class saw net inflows of £1.1bn across active and passive funds, a fifth consecutive month of inflows which helped the asset class recover from the record outflow of £6bn suffered in March.
The most popular asset class in September were allocation funds, which took in a total of £1.6bn. Some of the most popular allocation funds were Schroder Countrywide Managed Balanced, JPM Multi-Asset Moderate and JPM Multi-Asset Cautious, while offerings from Baillie Gifford, Royal London, and Liontrust were in vogue.
Meanwhile, Japan large-cap equity funds were the most popular single category, taking in £1.5bn, though the Asia Pacific ex-Japan equity category, on the other hand, was among the least favoured in September.
US large-cap equities also saw inflows of £507m, but this was driven by one large inflow into the State Street ACS North America Index Equity fund, which took in a net £870m. Without it, the category would have seen negative flows.
The picture was also similar across UK-domiciled funds as a whole.
Morningstar associate analyst and manager of research Bhavik Parekh said: "The net inflow for UK-domiciled funds in September totalled GBP 2.3bn, similar to the previous two months.
"However, an otherwise poor month for equity funds was hidden by a large net inflow of £1.8bn into a single fund [the BlackRock ACS Japan Equity Tracker]. Without this, the asset class would be in negative territory, fuelled by net outflows from UK and European equity funds."
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