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De-risking trend continues in UK while European ETFs prosper

Active_vs_PassiveUK active funds continued to suffer from de-risking in October, whilst index funds enjoyed positive flows.

Investors withdrew a total of £2.4 billion (€2.8 billion) from UK-domiciled active investment funds. Some of this outflow was due to the re-domiciling of funds into Luxembourg, the latest fund flow report from Morningstar found.

Index and money market funds, on the other hand, enjoyed positive flows throughout the same period.

Bhavik Parekh an associate analyst at Morningstar, said index funds - all of them open-end funds as there are no UK-domiciled exchange-traded funds (ETFs) - saw £1.3 billion of net inflows during the month.

Total inflows for index funds for the past 12 months stand at £18 billion, whilst redemptions from active funds are nearly £40 billion for the same period.

Money market funds saw net new cash of £880 billion in October – the highest inflows for the asset class since mid-2017.

A separate report from Refinitiv showed that European ETFs enjoyed inflows of €11.1 billion and assets under management in the European ETF industry increased to a record of €809.2 billion in October.

Equity ETFs posted the highest inflows with €7 billion, followed by bond funds with €4.3 billion.

The ETF which saw the most inflows was the UBS ETF-MSCI United Kingdom Ucits ETF (GBP) which accounted for net inflows of €1.2 billion, according to the report.

Vanguard recently slashed fees across its ETF and mutual fund ranges, raising the stakes in the ongoing price war between ETF providers.

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