>>> July 14: A NISA month for trackers
* July UK net flows £1.9bn in line with previous months despite NISAs going live: UK
net Retail flows in July 2014 of £1.9bn vs £2.1bn in June. This is in line with the previous
monthly run rate. This might have been a slight disappointment given raised new ISA
(NISA) limits went live on 1 July. However the miss is caused by non-ISA flows, which
perhaps could be more excusable given the seasonal slowdown. ISA flows did actually
get a boost with £499m net flows, which is comparable to £476m in Mar-14 when we
saw a strong lead up to ISA peak season. Equity was the best selling asset class, with
net flows of £1.2bn.
* UK Equity Income top selling sector for 2nd consecutive month: After the record
£1.4bn net flows into UK Equity Income, July sales were very strong again with £1bn.
UK All Companies was the worst seller once more with -£230m net outflows (May-14
net outflows: £421m), although this is likely to have been skewed by the reclassification
of the Invesco Perpetual High Income fund into this category, which has seen investors
switching out to invest in the Woodford Income fund instead. Interestingly, tracker
funds were the highest ever at £532m. Tracker funds are now 10.2% of total UK AUM.
There is a clear trend post-RDR of investors gravitating towards either low-cost passive
investing or alpha.
* $63bn net flows in Europe: European mutual fund flows ex Money Markets was $63bn
in July, up 9% from $58bn in June. Bond flows were broadly flat at $25bn, while Equity
flows improved from $8bn to $16bn. The top seller was Asset Allocation; the worst
selling theme was Global High Yield Bonds.
* Individual fund manager data shows July inflows: Lipper data showed most of the
Asset Managers seeing decent inflows across a range of asset classes in July. This is
reassuring given slower Q2 flows caused some concern. Managements’ outlooks at Q2
results were more upbeat of a good pipeline in H2. Avg UK asset manager multiples of
13.5x 2015E PE look undemanding compared to through-the-cycle avg of ~14.5x. We
are Overweight Schroders (13.6x 2015E PE) and Aberdeen (11.7x cal. 2015 PE).