Investors pile into bonds in February as volatility rises

Bond funds saw the most inflows in February as equity market volatility increased and net bond fund sales reached £ 1.4 billion for the month.

In total, funds registered in the UK sold net new shares of £ 2.4 billion during the reporting period, according to the latest statistics from the Investment Association. The month saw a sharp sell-off in longer-term government bonds as investors worried about rising inflation due to the huge US economy.

Mixed asset funds were the second largest seller by major asset type with net sales of £ 838 million.

At the sector category level, global equity was the top-selling at £ 1.2bn, followed by Asia-Pacific excluding Japan, which attracted £ 510mn.

Despite overall outflows in the US and the UK, smaller company funds remained popular as investors continued to look for opportunities in more cyclical areas.

UK smaller companies got £ 142m over the month as UK equity funds lost a total of £ 1bn. Similarly, £ 94 million was withdrawn from North America, but US smaller North American companies raised £ 252 million.

Chris Cummings, CEO of IA, said, “The preference for Asian stocks continues as Asian economies open to Europe and the US after the pandemic advances.

“Global stocks remain a long-runner as savers want to spread their risk through globally diversified funds.”

Real estate and money market funds saw the largest redemptions, with outflows of £ 99m and £ 486m, respectively. Global bond funds, however, were the worst-selling sector, with outflows of £ 987 million.

Responsible mutual funds under management were £ 61 billion at the end of February, with their total share of industrial funds under management standing at 4.3%.

Investors pile into bonds in February as volatility rises

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