Passive powerhouses attracted most of the retail money in the second quarter of 2024.
Passive funds have bought up investors’ money and “eliminated the wealth of active managers,” said Benjamin Reed-Hurwitz, head of research at ISS MI EMEA and editor of the latest Pridham report.
In the second quarter of 2024, investors pumped money into funds, with large fund groups benefiting, although investors preferred passive solutions over active funds.
The Pridham report monitors sales trends in the UK fund market using data provided by the fund groups themselves. It covers over £1 trillion in assets under management, with Vanguard included for the first time in the latest report.
From April to June this year, around 60% of the UK’s largest asset managers increased their net revenues, while 43% reported positive net inflows in retail banking during the quarter, compared with 38% in the previous quarter and 21% in the last three months of 2023.
The positive sentiment, coupled with a slowdown in outflows, has led to “cautious optimism” among fund groups. However, whether this trend will continue in the third quarter “remains to be seen,” says Reed-Hurwitz, especially given the strong market volatility we have seen in recent weeks.
“On the positive side, investors have historically found equities attractive when interest rates have fallen, as is the case in Europe and perhaps soon in the US,” he said. “This could well set the stage for this momentum to continue through the end of the year.”
However, it was passive equity funds that came out on top, with net sales of over £5 billion. The top five fund groups by turnover in the second quarter were all big names in index funds – BlackRock, Vanguard, Legal and General, Fidelity and HSBC Asset Management topped the charts, as the tables below show.
Source: The Pridham Report
Vanguard was a leader in the distribution of balanced-asset funds and its LifeStrategy series (particularly the 80 percent equity option) contributed to the company’s success with retail investors.
But while the success of passive funds “has hurt many active managers recently,” Reed-Hurwitz is convinced that “investment opportunities will continue to expand in the coming quarters,” especially in equities.
In fact, the report showed that many active managers managed to achieve success in certain areas.
The best example of this is JP Morgan, which climbed the rankings by launching a UK-domiciled version of its Global Focus fund, which became the top performing fund by net turnover during the quarter, with assets under management of £1 billion.
Global and North American funds remained crowd-pleasers, but there were successes elsewhere too. Managers such as Artemis were able to attract interest in less popular equity sectors, with Artemis UK Select among the top performers in the UK, taking the asset manager to ninth place in the retail gross sales rankings.
In bonds, eight of the top 10 bond fund houses by gross turnover focused on sterling corporate bond funds as investors’ first choice, with BlackRock, LGIM and Royal London all benefiting from their popularity.
