Investors flee bonds as rates stay grounded

According to the Investment Association (IA) bond funds saw a net outflow of £515 million in September, the largest exodus from the asset class since June 2013 as investors continue to shun fixed income in the face of central banks' reluctance to raise interest rates from record low levels.

In contrast, equities were the bestselling asset class for the fifth consecutive month with net sales of more than £1 billion, the highest level since July when over £2 billion poured into equities.

This helped to push total fund sales to private investors to £1.1 billion in September, up from £825 million during the same month last year.

The UK was the bestselling equity region, with UK equity funds attracting net retail sales of £568 million in September. This compares to an outflow of £376 million in September 2014.

BESTSELLING REGIONS

Commenting on the results, Guy Sears, interim chief executive at the IA, says: 'Net retail sales went back above the £1 billion mark in September with investors directing the majority of their money into equity funds - UK equity in particular. However fixed income continues to suffer the highest withdrawals we have seen for this asset class for some time.'

Europe was the second bestselling region for equity funds with net retail sales of £301 million last month, followed by global with sales of £233 million, North America at £81 million and Japan at £16 million.

Asia (ex Japan) equity funds were the only ones to see an outflow in net retail sales in September as the region shed £129 million. This is the fifth consecutive month of negative net retail sales for Asian equity funds as investors continue to flee the region on fears over slowing economic growth in China.

UK equity income was the bestselling individual sector in September for the third consecutive month with net sales of £445 million. The IA says that the sector has been its bestseller in seven of the past 12 months.

The targeted absolute return sector was the second bestselling sector with net retail sales of £323 million, followed by Europe excluding UK with sales of £294 million and property with £196 million. The worst selling sector was protected, which saw an outflow of £284 million last month.

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