Investors dump absolute return funds despite market turmoil

Retail investors moved back into equities but exited absolute return funds in August as markets endured their worst month since 2009.

According to the latest IMA statistics, absolute return funds - designed as all weather funds which should decline less sharply than long-only portfolios when markets fall - saw a net retail outflow of £122m last month.

Outflows were the worst on record since the formation of the IMA Absolute Return sector in April 2008, raising questions about their role in portfolios given the current turmoil in markets which should play into their hands.

Elsewhere, the IMA - headed by chief executive Richard Saunders (pictured) - said investors moved back into equity income funds, with the sector seeing its best month for four years.

Though Global was the best selling IMA sector, with net retail sales of £337m on the month, UK Equity Income saw net sales of £211m, its highest level since May 2007 and well in excess of the monthly average of £53m over the past 12 months.

Equities were the highest selling asset class, with net retail sales of £515m in August. The figure is below the monthly average of £606m for the past 12 months but compares favourably with the £114m in outflows seen in July.

Net retail sales of £1.1bn across all asset classes in August were also up on July's £938m figure but below the 12 month average of £2.2bn.

Global was the best selling IMA sector, with net retail sales of £337m representing the highest selling month on record for the sector, ahead of June's £332m. The UK All Companies sector also saw a rebound in sentiment, with net retail sales of £142m, the highest since December 2010.

At £108m, net sales of bond funds in August dropped to the lowest level since January 2011.