Bond funds shed £1.6bn in October amid worst retail outflows since EU referendum

Total net retail sales over the period were negative, with £1.6bn leaving the retail fund sector, driven primarily by declining sentiment towards fixed income. 

Equities experienced overall inflows of £100m during October, while property funds saw a small volume of outflows at £39m. 

This latest figures come as a disappointment after the industry reported positive net retail sales of £642m in the previous month, and mark the largest retail outflows since the EU referendum in 2016. 

The IA saw its first negative outflows of £21m since the EU referendum during August, but had returned to inflows the following month. 

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The best-selling sector in October was Global with net inflows of £354m, followed by Mixed Investment 40%-85% Shares sector with sales of £228m. 

At the other end of the spectrum, the Targeted Absolute Return sector saw outflows of over £700m, a significant increase from the £138m seen leaving the sector in the previous month, making it the worst-selling sector.

All of the fixed income sectors saw outflows with the Sterling Strategic Bond sector worst affected with losses of £437.8m. Global Emerging Market Debt saw the lowest outflows at just £14.8m. 

The IA said fixed income funds had seen their "appeal dented" during the month as the era of quantitative easing is coming to an end.

The Fed started reducing its "gigantic" $4.5trn bond-buying programme in October last year, while the European Central Bank is set to bring an end to its quantitative easing programme in December.

Meanwhile, UK All Companies, which had been the worst-selling sector for several months, saw outflows lessen from £391m in September to just £21m in October. 

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Chris Cummings, chief executive of the Investment Association, said: "Savers are stepping back from bonds with notable outflows from fixed income funds in October. With the era of quantitative easing anticipated to end in both the US and Europe, fixed income funds have seen their appeal dented.

"This declining appetite for bonds has contributed to UK funds experiencing their largest net retail outflow since the EU referendum, although it remains to be seen whether this is the start of a broader trend within fixed income."

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