Retail funds top £43bn, but UK outflows at £5.3bn

The UK’s Investment Association (IA) has revealed that savers invested £43.4 billion in retail funds in 2021 — the second best year on record behind 2017 net retail sales of £48.6 billion.

However, outflows from UK equity funds reached a record £5.3 billion in 2021 — larger than the previous record of £4.9 billion in 2016, when the UK voted to leave the European Union.

The IA represents the UK investment management industry. It has 270 member firms that manage £9.4 trillion of assets.

“2021 was a year characterised by continued high inflows to responsible investment funds, outflows from UK equity funds, and an increased appetite for active-style management,” said the IA.

Other key findings of the IA for 2021 in the fund market show:

  • Inflows to responsible investment funds totaled a record £16 billion, up £4.3 billion on 2020
  • Most inflows in the retail fund market went to active funds in 2021, with active funds pulling £25.2 billion, compared to £18.3 billion to tracker funds
  • Equity, fixed income and mixed asset funds all saw inflows of more than £10 billion each, with equity funds being the most popular asset class in 2021 at £14.8 billion

Key IA findings for December 2021 included:

  • December saw net retail sales of £2.3 billion, with equity funds being the most popular asset class seeing £1 billion of inflows
  • Global remained the best-selling IA sector for the seventh consecutive month, and was the best-selling sector every month of 2021, excluding May
  • Tracker funds outsold active funds in December, with inflows of £1.3 billion compared to £930 million for active funds.

Investment Association CEO Chris Cummings said: “Investors put their lockdown savings to work in 2021, with near record inflows to retail funds in 2021 helping investors take part in the global Covid-19 market bounce-back.

“This was particularly so in the first half of the year, when monthly inflows into funds peaked at £6.2bn at the end of the 2021 ISA season in April.

“While new variants of Covid-19 appeared throughout the year, every month of 2021 saw net inflows – against a backdrop of rising prices eroding the value of saving in cash.

“The return of significant inflation in the second half of 2021 indeed left its mark, with falling flows into bond funds, but overall investor confidence remained resilient.

“Growing focus on climate change in the year Glasgow hosted COP26 also helped take flows into responsible investment funds to new heights.”