Passive fund net retail sales reached record highs in July, according to the latest UK monthly statistics.
Data from the Investment Management Association (IMA) shows tracker funds sales climbing to £532 million (€668 million), the highest level since IMA records began in January 1992.
Funds under management for tracker funds were £83 billion as at the end of the month, and their overall share of industry funds under management was 10.2%, compared to 9.4% in July 2013.
Passive funds also sold well according to recent Lipper data. The BlackRock Collective Investment Funds – UK Gilts All Stocks Tracker, and the UBS (CH) Institutional Fund – Global Aggregate Bonds Passive, both made it into the top five funds by sales in June.
Laith Khalaf, senior analyst for independent financial adviser Hargreaves Lansdown, sees passive funds as a growing part of the UK asset universe.
He says: "I think people and fund groups are either going for a low cost passive option or a high alpha fund, which costs a bit more, from an experienced and proven manager."
Khalaf acknowledges that controversy over the true value of active fund management is impacting on investor behaviour. He says: "In the UK, we have been beleaguered by a myriad of closet tracking funds, which don't really take a lot of active risk but on the other hand charge people amounts which are not dissimilar to full active funds, if not more."
He believes that this is leading investors to become more discerning about both the performance and cost of funds. "They are likely to move either to passive or to fully active, or indeed a blend of the two. But the middle ground for those sorts of 'core funds', which are more or less 'passive plus', is becoming more eroded."
The IMA statistics also show that equity was the best-selling asset class for the sixteenth consecutive month in July, followed by mixed asset and property.
Jonathan Lipkin, IMA director of public policy, says: "Net retail sales remained strong in July at £1.9 billion, with equity funds again leading the way. As in June, a key feature was very strong sales of UK equity income funds, which took in £1 billion."
©2014 funds europe