* August UK net flows £695m lowest since Jan-13: UK net Retail flows decelerated to
£695m in Aug-14 from £1.9bn in July, the lowest since Jan-13. Mixed Assets was the
best selling asset class with £232m net flows. Equity flows declined to £168m whilst
Bond flows remained minimal at only £36m. Overall, this is a significant slowdown
compared to recent months, but given seasonality and only one month of data, it is too
early to judge whether this represents a change in the trend of strong sales. Retail
investors have been very engaged with the market Apr-July, due to raised ISA limits and
the Woodford fund launch, so a pause would not be abnormal. We would remain
cautious on a September flow recovery given the equity market selloff, but we remain
more optimistic on Q4, especially if some of the IPO pipeline is deployed.
* UK Equity Income best selling sector once more: UK Equity Income retained top spot
as the most popular sector with £275m flows. Interestingly, we see Asian and GEM
Equity return to the top 10 best selling sectors table, which just 6mths ago were sitting
unloved in the top 10 worst selling list. The worst selling sector in Aug-14 was UK All
Companies, with -£258m net outflows. The rotation out of Midcaps seen since May
continued, with -£242m out of UK/European Smaller Companies in Aug.
* $28.8bn net flows in Europe: European mutual fund flows ex Money Markets was also
disappointing, down from $63bn in July to just $28.8bn in Aug. Equity flows were
minimal at just $365m, while Bond flows also declined from $25bn to $15bn. The top
seller was Asset Allocation; the worst selling theme was Bonds USD Corp High Yield.
* Individual fund manager data still shows net inflows: Lipper data showed most of
the Asset Managers still saw net inflows in Aug, with Schroders appearing most
resilient with inflows across a range of sectors. All our listed Asset Managers have sold
off in Q3 and appear to be trading cheaply at ~12x on avg, below historical avg 14-15x.
We are Overweight SDR and ADN (12.5x and 11x cal. 2015 PE respectively).